We really need a FAQ on this subject
What you saw was a star (most likely it was Sirius, the brightest in the sky) with it's light being refracted by the atmosphere. Pockets of air between you and the top of the atmosphere act like little prsms, separating the white light into it's component colors. These colors are pointed toward your eye at different times, so it appears to change colors. When the atmosphere is really unstable, it can even appear to blink on and off for a few milliseconds because all the light is bent away from you.
It is easiest to see with Sirius bcause it's so bright, and a certain amount of photons have to hit your eye in order for the cones there to detect color. There are about a dozen stars that are bright enough for the effect to be easily noticed.
It is most easily seen when the star is closer to the horizon, since you are looking through more air. When overhead, there's only about 60 miles of air, when you are looking at a star near the horizon, it can be more than 600 miles of air.
Wayne