A common belief is that chameleon lizards change colors in order to camouflage themselves and blend with their surroundings. Yes, coincidentally, brown and green may indeed match their backgrounds, but this is not why they have this uncanny ability.
As it turns out, the lizard will change its color depending on its emotional disposition.
The question of how they do it, has long mystified scientists, who now seem to have found the answer. Unlike other animals that also change color (most notably the squids and octopus), chameleons don’t seem to alter their hues by modifying their pigments within their skin cells but it all has to do with their unique skin. (the article continues after the ad)
Chameleons have two layers of crystal-like skin cells. By changing the structure of the upper layer of cells, they alter the way light is reflected. When a chameleon is relaxed, the cells are close to each other which reflects lights with short wavelengths, like the color blue. When a chameleon’s skin gets excited, the distance between their cells expands which reflects light with long wavelengths, like the colors orange and red.
It’s important here to not that only adult male chameleons are capable of this color change and it usually happens when they see a rival male or are courting a mate.
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Sources: Chameleons’ Color-Changing Secret Revealed | Can Holding in a Fart Kill You?: Over 150 Curious Questions and Intriguing Answers