what do the colours on warcraft logs actually mean?

also check if you're looking at the overall ranking or the item level bracket. the bracket one compares you to people with similar gear, so a grey parse overall can be blue or purple there, which is a lot fairer on a fresh alt.

They're your parse percentile, so how your damage (or healing) compares to everyone else on the same spec, same boss and difficulty: grey under 25, green 25-49, blue 50-74, purple 75-94, orange 95-98, pink 99, gold 100. The people being compared are the ones who log, which skews toward better players, so blue is perfectly fine. You can also switch the view to item level parses to compare against people geared like you.