Water, however, presents a serious challenge for fish and fishermen when it comes to vision and color. Many characteristics of light quickly change as it moves through water. The first thing to realize is that the color of your fly in the water is almost always different from what it is in the air. I have to be a little technical to explain this, but I think if you bear with me, you’ll have a better understanding of how fish perceive color and how this impacts the flies we tie and use.

Absorption also restricts how far light penetrates into the water. At about three meters (about 10 feet), roughly 60 percent of the total light (sunlight or moonlight) and almost all the red light will be absorbed. At 10 meters (about 33 feet), about 85 percent of the total light and all the red, orange, and yellow light have been absorbed. This has a direct bearing on how a fish perceives a fly.

It should now be clear how the depth of the water or distance from a fish affects the visibility of your fly. In extremely shallow and very clear water, colors may look similar to their appearance in the air; as your fly gets just three feet deep or three feet away from a fish — or less if the water has limited clarity — the colors will start to change, often with surprising results.

http://www.midcurrent.com/articles/science/ross_color.aspx