Recently, my 3-year-old was delighted to find a fuzzy black caterpillar crawling across the sidewalk in our front yard. We took it inside and put it into his brother's bug house, which resembles a tiny pop-up hamper with a zippered lid. Both boys took to feeding it leaves and soon we had an interesting puzzle -- our caterpillar is now turning orange.
I never knew that caterpillars could change colors. Poking around on the Internet, I learned that some caterpillars change color in response to temperature (like the Tomato hornworm)(1). Others are affected by diet and crowding. Some species, like the caterpillars of the American Peppered Moth, can even change color to match their host tree twigs. This ability to hide, known as crypsis, allows them to avoid being eaten by birds (2).
Caterpillars can also change colors when they shed their skin. Christmas Notebook has an amazing set of pictures of caterpillars molting (and then eating their own skin!) in butterfly babies.
Each stage between skin-shedding is known as an instar. Monarch Butterfly and Milkweed Mania has a great set of pictures showing the size and color differences of caterpillars at various instars in Life Stages: (determining instars).
Along the way to learning about caterpillar colors, I found this great page from the Royal Alberta Museum on how to keep butterfly and moth pupae over the winter, advice that just might come in handy!
(1)Abstract of "Hidden Genetic Variation Yields Caterpillar of a Different Color" by Elizabeth Pennisi as presented in the February 3, 2006 issue of Science.
(2)"A Reversible Color Polyphenism in American Peppered Moth (Biston betularia cognataria) Caterpillars" by Mohamed A. F. Noor, Robin S. Parnell, and Bruce S. Grant, published online September 4, 2008 at PLoS ONE