Hello! I'm a student studying VFX/Pipeline and an avid user of Houdini, and I've been looking everywhere for an answer to this question but haven't had much luck. I'm working in solaris and trying to learn the USD workflow a little bit better, and I keep seeing the nodes in /stage highlighting themselves with random color, like green, pink, orange, red, etc. and it's driving me crazy that I don't know what it means! Does anyone have any insights?

The colors are indicating the “active layer” that is being modified by the node. The specific colors don't matter at all. But when a chain of nodes _changes_ color, you know that you have started editing a new sublayer. To see this in the simplest terms, create a cube LOP, followed by a few null lops, then a Configure Layer Lop, and a few more null Lops. They should all be the same color. Now on Configure layer, check the “Start New Layer” checkbox. Everything below the configure layer is now a different color, because those lops are editing the “new layer” started by the configure layer LOP.

When you have branching node structures as in your screen shot, you can see how the merge, for example, “passes through” the active layer (color) of the last connection, at least in “separate sublayers” mode. Though generally (not universally) LOPs with multiple inputs will either “pass through” the color of the first input because the secondary inputs are used only to modify the active layer, not start a new layer.