It's tough to sleep in space. You're stuck in a noisy machine all the time, the sun comes up every 90 minutes, and everything is lit with a garish sci-fi fluorescence. About half of all astronauts have to resort to drugging themselves at some point to fall asleep, and NASA wants to make things easier with the help of color-changing LED lights.
Lights that simulate day and night cycles are so pervasive in science fiction that it's sort of remarkable that NASA didn't design the International Space Station with that feature already included. But, it didn't, and most of the ISS is lit by fluorescent tubes, which emit light that has a way of boring directly through eyelids and making sleep difficult.
It also doesn't help that astronauts are stressed out all the time, almost never get to take showers, and are being monitored by an entire dedicated government agency 24/7. As a result, most astronauts get about six hours of sleep per night, despite being allowed a solid 8.5, leading to fatigue, general grumpiness, depression and mistakes at work. And when you work on a machine that your life depends on, mistakes are more of a problem than they would be otherwise.
By 2016, NASA will have installed new arrays of LED lights in place of the fluorescent lights in the U.S. areas of the station. These arrays will be programmed to wake the crew up with blueish light, project whiteish light during the day, and then send everyone to bed with reddish light in the evenings.
Since humans have evolved to respond to color changes like these on Earth, the idea is that it'll help regulate melatonin production, leading to healthy, natural sleep cycles. Sounds like a great idea that has a real chance of working, as long as nobody up there on the ISS looks out a window.