As far as I can remember from my browsing of the Maplin catalogue, it goes something like this...
LEDs are small, yes? How about we take a red LED and a green LED and put them together in the same housing and add an extra leg to the LED package. Apply voltage to one leg and the red LED is on. Apply voltage to the new one and the green LED is on. Apply to both legs and we get both LEDs... a sort of yellow with a red tint at one end and a green tint at the other.
This was in the old days when all you got were red, green and (very expensive) blue LEDs in those standard domed resin-filled shapes. Once they realised they could change their shape, make them smaller and add new colours to the package, they really took off.
The first "white" LEDs were a carefully chosen red, green and blue LED but now they have new single-colour LED compounds and the white is a single real white LED.
WIKI : http://en.wikipedia.org/wiki/Light-emitting_diode