In the premiere issue of Amy Powers' Inspired Ideas, Piper Wise shows how to add color to embroidery, a technique she learned from her husband's aunt. She uses the duck design from my Party Animals pattern to create a motif on a little girls dress.
You may have seen some of the vintage Vogart stamped-for-embroidery projects with colored areas already printed within the design. Here are a few examples:
Using Piper's technique you can mimic this effect yourself. Another way to add color is to use acrylic paints. Acrylic paints are plastic-based so the paint fuses with the fabric and becomes water-resistant when dry. The nice thing about acrylics is that you can dilute them with water if you want a softer, more watercolor-like effect.
Generally, with stamped embroidery projects, you embroider the outlines of shapes; adding color helps to fill in some of the empty spaces in your design.