Can anyone explain what the color stars mean?

it is bassicaly the next level. see it as this

1 yellow star is lvl 1.1 and 4 yellow star is 1.4

1 purple star is lvl 2.1 and 4 purple star is lvl 2.4

1 red star is lvl 3.1 and 4 red star is lvl 3.1

to get to the next lvl you need to combine 2 of the same lvl and colour.

to get 1 purple star you need:

5*+5*=1 purple

4*+4*+4*+4*=2 lvl 5 yellow

3*+3*+3*+3*+3*+3*+3*+3*=4 lvl 4 yellow

16 lvl 2* =8 lvl 3 yellow

32 lvl 1* = 16 lvl 2 yellow

so you need 32 lvl 1 star tower of the same kind to make 1 purple star tower

feel free to calculate what you need for 1 red lvl tower;)