This is a tri-state button, which means it can be in one of three states.  The default state means that point clouds will be drawn using what ever colour properties have been set for them; that is either RGB or Intensity.  You can mix and match how point clouds are drawn. The first press of the Point Colouring button will switch ALL point clouds to be rendered in RGB mode.  Press the button again and they ALL be drawn in intensity.  Press it a third time and point clouds will return to their “mixed” mode.


Note: This value can be adjusted in the Properties for the point cloud - Point Cloud Properties.