I use them to tell me what stage the photo is at development wise. Green for finished images (well at least finished for now LOL). Blue for RAW files that have been sent to PS for additional processing. Purple for Proof copies, that have been set up ready to print, so have the correct printer profile already assigned, as well as cropped to suit the aspect ratio needed for that paper size/layout, the crop ratio changes if you use a border for example, so all of those things make for additional copies. They are all in Print Collections, but it makes life easier when looking at folders.
I would not consider trying to use the colour labels to replace key words though. Although you can use text labels as well as the colours, but they all show up was white in the grid view. I always try to comprehensively keyword my images. This allows me to have whole hierarchies of Smart Collections, based on subject types and specific content. This is really useful for my Aviation images, as I have them sorted by Airshow location and year etc, as well as by manufacturer/type and also for display teams etc. Many of the images are in multiple collections, but that is fine as I then don't have to try to remember anything about an image, but can still find relevant images really quickly. I basically look at the smart collections as permanent sorts of the whole catalogue, these are also stored in collection sets too. They are useful as you can select the collection set, and see all the images in all of the collections within that set. One other thing that I do is use IPTC Subject codes to sort all of the images into different categories. I use unused values to make my own codes for things that aren't covered by the IPTC system.
Alan