It's part of the "morality" system. Paragon, which is show in blue, is morally good/pure choices. While Renagade, which is shown in red, is morally bad/evil choices. This morality system gives some added bonuses to skills, further diolog options, and peoples opinions to you. It is best to only focus on one of them in order to have it maxed out. Focusing on both of them won't allow you to max any of them out, and some situations in the game require you to have one or the other maxed to gain special options.
Mass Effect had the morality system, however it's paragon and renagade could only be increased through chat diolog. Mass Effect 2 and 3 had the "quick time even" trigger to further increase it. So when you click your mouse button, what ever one you did will add into that system.