Chromatophores are small pockets of pigment found in the skin.  They allow creatures such as chameleons and squid to change their body patterns and color to better blendwith their background.  However, the chromatophores of cephalopods are distinct from those of reptiles because they are controlled by the central nervous system (CNS).  This connection is what allows squid, cuttlefish, and octopi to change their colors so rapidly. Nerves send signal to muscles connected to each chromataphore (as seen in the diagram) which force them to contract. These contractions pull at the chromatophore and forcing it to expand, spreading the pigment throughout. These pigment cells are responsible for the brown, orange, yellow, and even iridescent colors you see.