The Color selection panel is part of Fancy Product Designer Plus Add-On.
First of all you have to choose the layer for which you want to use the color selection panel. Go to your Fancy Product Builder, select the Product and the layer. Then, in the general tab of that layer you will find an option to enable the color selection panel for the selected layer.
After that you need to define the placement of the color selection panel via the Plus tab in the global or individual product settings.