What do the colors of the Reputation Bar in Kerbal Space Program mean?

If you look carefully, you'll see numbers on the reputation bar. It sounds to me like you're in the area of 700-1000 reputation. The pin in the middle of the display corresponds to your current reputation. As you gain reputation, the background moves to the left, and you enter the green and blue zones of high reputation. At the start of the game, you'll have 0 reputation, and the bar will indeed be green and yellow.

The striped blue area on the right is reputation over 1000. I don't know if it's possible to pass that. The areas corresponding to less reputation are to the left, and get progressively yellower until you go negative, at which point it starts to become red. (I haven't played in those areas yet, so I don't know much about it :P)

The purpose of reputation is to affect what contracts you're offered. I suspect the color zones on the reputation bar represent different 'levels' of contracts. I haven't tested this though, and the colors could be purely aesthetic.

Your Reputation effects the quality of contracts you receive, it appears that the higher your rep, the more likely you are to be offered high prestige contracts. Though this system has been left vague by the developers and the community has not had a chance to explore it fully yet.

The indicator seems to follow the light spectrum, red being the worst reputation.