It varies the amount of Red, Green or Blue color. By varying any pot from min to max, the amount of that color is varied from 0% to 100%. So, by setting these three pots to any different value will give different combination of these three colours for example. When POT3 is turned to max value Blue LED intensity will be almost 0%.
At that time as other two pots POT1 and POT2 are varied, it generates different colors like Red, Green, Yellow, Lime, Orange, and may other shades of Green and Red colors.
Similarly, when POT2 is set to max value to turn off Green LED and when POT1 and POT3 pots are varied it generates Red, Blue, Magenta, Violet and various shades of Red and Blue colors. Thus, by varying these three pots many different colours can be generated and that’s why it’s called RGB bulb.
Project prototype is shown below