As explained so well by The Best Ideas For Kids:
“This science experiment is a great example of coloring mixing and capillary action. Kids can learn about how secondary colors are formed when the orange, green and purple colors are made in the empty cups.
Capillary action is what makes the dye move up the paper towel. The water moves upward through the paper towel, lifting the food dye molecules with it. This same phenomenon is what allows trees to get water from the ground with their roots. Paper towels are made from fibers found in plants, called cellulose.”