A Colony is a type of settlement built for the purpose of creating a large civilisation. They are geared towards rapid expansion and where possible, terraforming. The main difference between a colony and Free Settlers are that the latter aren't interested in (or don't prioritise) growth.
Colonies can vary both in terms of size, and also in terms of why they were founded.
The colony size is a strong influence on the technology that the colony can support, but it's rare for any colony to be able to support a culture of TL 8 or above without a lot of outside support.
Corporate based colonies are the most common. A colony requires a large investment, and the investors are interested high rewards over the long term (hundreds of years or more). Rapid growth tends to be seen as critically important, and if this causes social issues then that's just too bad.
These tend to have a strong religious government, and are started in order to expand the faith. They are the product of large, organised religions.
Found on harsh worlds where people can't live on the surface. Tend to be on the Small to Medium size.
Found on harsh worlds with Medium to Large colonies.
Tiny or Small colonies on class I or II worlds. Lots of small settlements which specialise in farming.
Small or Medium colonies on class I or II worlds. Lots of medium settlements which have branched out into industry and craft rather than just basic agriculture.
Medium or Large colonies on class I or II worlds.