Engineers think of color as existing in things called spaces which are mathematical, 3D models the purpose of which is to organise them. Different color spaces serve different purposes: some are meant for printing, some are meant for screen-based work, some are meant for TV. The ColorSpace can move an image from one color space to another. The neat thing about this is that it makes it possible to use channels from exotic color spaces as masks to simple RGB operations or to perform adjustments on images to produce results that would have been impossible in ordinary RGB space. The workflow is: convert from Nukes default Linear color space into the color space of your choice, perform your funky magic, then convert back to linear.
The saturation channel of HSL can, for example, have a contrast adjustment applied to it which could desaturate the less saturated parts of an image and super saturate the remainder. Woot! Try that in Photoshop!
Lab color space is another useful fellow. It is the quantum physics of the color world and I shall but kiss the shadow of it's vast and complex form. The fascinating thing about this space is that it separates the lightness values of an image (the L channel) from it's hue and saturation (the a and b channel combined). HSL also does this but not nearly so well. You can take the a and b and move them into those of another image. The effect of this is similar to Photoshop’s hue blend mode (a blend mode that Nuke lacks). I have found it useful to augment the colorfulness of a dull sky by using the blurred color values from a vivid sunset.
Try also blurring the a and b channels. This will blur only the hue and saturation components of an image and leave its lightness values alone.
A novel use for the ColorSpace node can be found in the Assets page (see the Double Rainbows asset).