The underlying reason for the colour is to warn you when they may attack without warning.
A good example are “diamond rats” - those shown with a diamond symbol in the name. If you have a slightly negative standing then they are red. If you are heavily negative they are red and will attack you without warning.
If they are blue because you have a slight positive to them, they’ll ignore you. Very positive and their logistics ships will repair you.
Interactions between entities in Eve is complex and leads to emergent behaviour - I recall CCP noting that one of the biggest battles in Eve was NPC v NPC in a system where no Capsuleers were present.
I like the idea of us being in a living Cluster rather than just “on rails” entities. But Emergent System behaviour is a tricky thing to balance.
CCP should be praised for heading that way.
(@CCP_Aurora - please make sure the relevant developers in CCP know it’s appreciated. They get too much abuse here and they do some incredible things)