We don't dye because we have to. We dye because we can.
At a minimum, dyeing or tinting batter, buttercream and dough is a whole lot of fun (ask any five-year-old). Invent the next ombré cake, though, and you just might break the Internet.
Here's how to taste the rainbow.
This is the water-based food coloring you see in grocery stores for tinting icings, batters and dough. It comes in small squeeze bottles often topped with little caps that look like gnome hats.
This stuff is easy to use: You just add it drop by drop until you've got the hue you want. It works especially well if you're going for a pastel color. Liquid dye is inexpensive, easy to find, and you can use it for all kinds of projects. And those gnome hats are super cute.
Because this dye is water-based, the liquid added to a recipe can throw off baking times and ingredient ratios. This is more of a problem if you're using a lot of dye to create a deep color. You'll want to make red velvet cake with something else.
Liquid gel dye
This viscous liquid has a glycerine and/or corn syrup base that lets it deliver concentrated color. Like liquid dye, it comes in a tiny squeeze bottle.
This is what you want for that red velvet cake. The lower amount of liquid also makes these dyes ideal for candies, confections and icings. Plus, since you will use less per project, liquid gel dyes last longer than liquid dyes.
Fewer stores are likely to carry liquid gel dyes dye so you need to plan ahead. Also, they can be hard to mix into some types of stiff cookie dough without toughening the texture.
Gel paste dye
A super-concentrated version of liquid gel color; it is typically sold in small containers with a screw top because it is too thick for a squeeze bottle. You'll dip a toothpick in it to tint icings. This may be the dye of choice for large-scale baking or candy-making projects.
Since you use these dyes in teeny-tiny amounts, one bottle lasts practically forever.
Buying this dye will probably involve a trip to a specialty store or an online order. Also, it's extremely easy to add too much; you might end up with a green so dark it's black. Finally, some red tones add flavor on baked goods (although a few manufacturers make a "no-taste" red option). Some bakers complain that colors change after a few hours.
When you can't add any moisture at all to a recipe, you reach for this. It's great for tinting crystal sugar, coloring chocolates and preparing dry mixes. Macarons and meringues, which are very sensitive to added liquid, also love it.
You never need to worry that it will dry out.
This dye takes some effort to find at stores or online. Also, it isn't easy to mix into very thick doughs or batters.
Natural food colorings
These are derived from natural and plant sources instead of synthetic compounds. Saffron or turmeric may be used for yellow, carrot juice for orange, beets for red.
Healthier than food colorings, these may also be better for people with certain food allergies. They are typically devoid of glycerine and corn syrup.
These are probably the hardest to find in stores; your best bet is to buy online. They tend to be a little more expensive than synthetic dyes. Also, the colors are sometimes more muted and earth-toned than you'd want for, say, a rainbow cake.