It kind of bugs me when these articles make it seem like 3d printing related stuff is brand new.
I was working on this last year since I had the same idea, but I gave up when I found this;
https://www.google.com/patents/US6129872
It was filed in 2000, so it won't be commercializable until 2020 I think.
That article doesn't say anything about how the device works, except that it mixes dye with the filament right before it's extruded. I was thinking of using a fuzzy fabric sponge type thing similar to what's inside a marker to press against the filament just before extrusion through the hot end (or cold end).
It would take extensive rework of the slicing software to make this viable for anything other than changing colors for different layers of the print. It takes a while to completely switch colors since dye residue gets stuck inside the nozzle and continues to mix with the rest of the filament that isn't supposed to be dyed that color. You can see the transition between layers easily because the dye-to-filament ratio drops off logarithmically, so each color never gets fully washed out.
If you wanted to do a full color print in which multiple colors are mixed at different ratios to get full RGB capability, there would have to be some fuzzy logic going on in the slicer and in the hardware to precisely control the flow rate. You would also have to extrude the unwanted mixed colors onto a separate part of the print platform (like a color-blob tower) until the mixed color isn't noticeable. Our open source slicers aren't even fully capable of reliable use of multiple extruders yet. We're also limited to STLs, so gradual color changes couldn't be added in easily. Try adding 3 or 4 or even 5 more outputs/inputs to control the coloring system. Also remember that our hardware doesn't allow for a lot of modularity.
I really like this idea, and I wish I could have taken my own design past the prototyping stage, but I got to exactly where they did with a mechanical design that works and a colorful print that has a vertical rainbow. I figured people would check patents and stuff before awarding me thousands of dollars of prize money (if I had entered the contests at my own universities' design contest). This is a great idea that won't be commercialized for a few more years.
Patents crush dreams.