By default, when you create a new tag there will not be any colors assigned to your Event Tag. If you have assigned Event colors to your Event, these will be the colors that show up on your Calendar, even after an Event Tag has been assigned to that Event.
However, when you add an Event Tag to an Event the colors of the Event tag will override any Event colors you have added for your Event. In the example below, you can see an Event that was assigned colors for the text and the background within the Event editor. You can see what happens before and after an Event Tag has been assigned to that Event.
If you don't want the Event Tag colors to override your Event colors, you can choose this option in the Event Tag editor dialog. This allows your Event to keep the same tag and you can still filter through your Events by turning the Event Tags on and off in the Event Tag list.
How to keep your Event Colors
When you choose to keep your Event colors, it will not affect the icon if you have chosen for the Event Tag. If your Event Tag has an icon, it will still show up on your Event when you apply that tag to it.