All chameleons can change color, although some are more variegated than others. Contrary to popular belief, chameleons do not change color to blend in with their surroundings, but rather change color based on their mood or to appear more threatening when something has entered their territory. Other animals, like the squid, have the same abilities, but they must gradually accumulate different pigments which they then release into the rest of their bodies. On the other hand, chameleons actually change the structure of their skin to reflect different wavelengths and are able to do so as often as possible.
On their outermost surface, chameleons have two layers of iridophore cells, special cells that retain pigment and reflect light. The structural arrangement of the cells changes when the chameleon is either excited or relaxed; thus, it changes color based on its state. When the skin is relaxed, the crystals within the cells are closer together, reflecting short wavelengths. This would mean that the chameleon would be blue, but most lizard skin has yellow pigments by default. Subsequently, these colors mix together to make a relaxed chameleon green and therefore naturally camouflaged. When the skin is excited, the cells spread farther apart, longer wavelengths are reflected, and the chameleon appears to be an orangish-red in stressful situations.
Photo by Tambako the Jaguar