It is genuinely both, and the useful distinction is between steady colours and patterns.
The patterns are system signals and worth learning, because they tell you things you would otherwise have to go looking for. A rapid double pulse means the controller is in pairing mode and discoverable. A slow pulse while connected to power means it is charging, and it going out while still plugged in means charging has finished. A brief flash pattern on connection indicates which player slot it has been assigned. And a distinct pulse or a colour change at low charge is a battery warning, which is the one most people miss and then wonder why their controller died without notice.
The steady colours are mostly assignment and decoration. On a console the base colour indicates the player slot, so your blue is usually player one. On top of that, games can set the light bar to whatever they want, and many do: health state, team colour, an environmental effect, or simply matching their art direction. That layer is purely decorative and varies entirely by game, which is why there is no single table of meanings to learn.
On PC the situation is different and worth knowing, since you may see the light bar behave differently there. Windows sends no lighting instruction, so the light bar often sits at a default colour and does not change with games at all, which is normal rather than a fault.
The practical upshot: pay attention to patterns, ignore steady colours. If you want the battery warning to be more useful, note that you can also dim the light bar in the console settings, which both saves a small amount of runtime and makes the pulse easier to notice against a dimmer baseline. And if a colour ever seems stuck and will not change at all on the console, that is worth a look, because a light bar locked to plain white usually means the controller has fallen back to a default state and a reset and re-pair restores it.
