Hogballs,

You are correct. This is a combination of setting a category, with a specific color say red, and marking it with a flag.

When you set, say a user, with the category color of red, a small box will display the color but the entry will not have the full red bar. Once you add the flag, to mark the message, it will then display as a full bar. This helps locating the item for latter use.

Hope this helps.