You type in something like this:
This would make "The" red and "Rock" green (I think).
You won't see the ^ or the number, but the color will change.
I'm not totally sure on all the colors, but 1 and 2 are red and green, 4 is dark blue.
Available colors are 1-9 I believe. However, they still take up the same amount of letters, even though you can't see them. So you can't have a long name and change every other letter to a different color.
Hope that helps