The RGB LED (or "Red-Green-Blue Light-Emitting Diode") Bit is a light with adjustable color. You can use the purple littleBits screwdriver to turn the dials and create your own custom color mix of red, green, and blue.
The RGB LED is actually 3 very small lights (a red, a blue, and a green light). Turning the dials changes the brightness of each light. The colors from these lights mix together to create every color in the rainbow.