From Hidden Frontier
In modern interstellar terms, a colony is a settlement placed on a distant world by a spacefaring race or government. Colonies are generally, although not always, civilian outposts established for agricultural or commercial purposes.
In Federation space, the Federation Council must grant permission before a settlement is established on any planet. Finding planets suitable for colonization and placement of settlers on suitable planets is one of the Federation's (and, by extension, Starfleet's) major functions.