Cuttlefish represent a well-known case deep from the ocean, where they can alter body color to camouflage themselves, attract mates, or warn off potential predators. This is achieved by actively controlling several groups of blue, red, yellow, brown, and black pigmented chromatophores. The pigmented chromatophores can be folded when retracted, and the collective action of these chromatophores then give rise to the remarkable color patterns on the skin.
The mechanism for color change in cuttlefish has been thought as a general mechanism for color and pattern change seen in animals. Until recently have scientists revealed a new mechanism in chameleons for controlling body colors without using pigments. It turns out that chameleons does it through a clever way of manipulating reflection. Rather than moving pigments around in the cell, chameleons actually use a tunable lattice of guanine crystals to reflect certain wavelengths of light. Its like the iridescence of a blue morpho butterfly, but customizable! Here is a nice viedo clip introducing this fascinating study:
The original research paper can be found here: