I'm not aware of any color coding associated with Google Contacts. I thought that they might indicate a difference between the classification of the person as a business, a friend, a coworker, family etc. but I changed some classifications on some folks from co-workers to friends but that action did not change the color of the circle. Also, if you log in to contacts and associate a photo of the person with the contact then that photo will show up in your contacts list in placed of a colored circle. My conclusion is that the coloring is simply a random association so not everyone has the same color for their icon.