Does a colosseum create 2 happiness or 4?

Solution 1:

As of the latest patch, the happiness bonus from the combination of all regular buildings (circus, colosseum, theater etc.) cannot provide more happiness than the number of citizens in the city.

Wonders (both national wonders and world wonders), however, are exempt from this, and can provide happiness beyond the number of citizens in the city.

Note that as of the June 2011 patch, the maximum happiness from a number of buildings has been reduced. So colosseum now provides a maximum of 2 happiness, theater 3, and stadium 4.

Solution 2:

It's the size of the cities. The colosseum creates up to 2 happiness and as much happiness as there are citizens in the city.