Looking into this, I've only been find that the colored boxes (as hideous as they are) are place holders for contact pictures. If you go into your Contacts App, tap a contact and choose edit.. you can tap to change the picture to one from the gallery or take one with your camera. To test this, I added a wallpaper as a contact picture then backed out to the main list and the colored box was replaced by my wallpaper picture.
In the Contact App settings, you only get two options.. 'Sort list by' and 'View contact names'. Rather disappointing, IMO. There should be more options to customize the app. I, for one, would love to be able to remove the gawdy colored blocks for my contacts I do not have pictures for (which is the majority for me) and the ability to show the default phone number with label when viewing the main list.
I suppose you could create a picture that you like (I'm thinking all black) to replace the colored blocks. Only thing is, you'd have to change each contact individually which, for some, may take a very, very, very long time. Not a very productive method of getting it done. But it would be a possible way to get it done.