The purpose behind having local, testing and remote sites is for separate development platforms for a given project following the Software Development Life Cycle (SDLC) standard. In DW "local" is intended for storing the local files, "testing" is intended to be where the server technology is setup, i.e. a sandbox server running PHP/MySQL, for purposes of development and testing in an environment that mirrors the production/presentation "live" site. Then "remote" refers to the actual live site, i.e. where you publish the finished product. Of course how these 3 sites in DW are used depends on the network topology and server resources, everyone does it differently as network drives are involved, they have one server for all three sites, or multiple servers.
DW is flexible for site setup, is the point.
Thanks for explaining the colors and I'm sure people who have used DW for years might have learned something. Your newbie mistake is typical, expected and trust me --- I've been there, done that! 😉
-jim