The colors determine the amount of prestige you get for winning and losing the battle. When attacking you will always get prestige, gaining more when winning. The more you attack the higher color you will get. In order to drop back to one of the smaller colors, you will need to be attacked and have them gain some prestige off you.
The following list is the order from least to greatest:
Grey - Harmless
White - Neutral
Green - Unfriendly
Blue - Hostile
Purple/Pink - Wanted
Brown - Most Wanted
Red - Enemy of the State (or so-called as EOS)
Upon a server merge, all notoriety is reset back to Harmless, including those in non-political cities and kings.
When attacking the same person over and over again, you will recieve fewer and fewer prestige points for consecutive wins.
Upon moving up to new cities (higher level caps) you will retain your notoriety but will be weaker than the others in the same region. Do not be discouraged from the attacks, as the weaker of the accounts will attack you first, giving you the names of those who will be the most likely to be beaten by you later.