I was in the IRC when dye was elaborated on (and said a considerable amount of the stuff myself), so I'll describe it more in detail for those who weren't there.
There is one dye element, it is colored using the deco layer. When the dye touches an element, it is turned the color of the dye using the deco layer. Basically dye is an element that allows interaction with the deco layer during a simulation. I don't personally care what state it is, but I could see solid or liquid being useful.
Possible uses- A soda fountain that mixes water and different colors of dye to create different drinks Paintball gun Paint based screens (No idea how, but some of the people making stuff are demi gods)