Pigments are used to coat the outside of a candle with color, while dyes are used to color a candle throughout. Pigments will create a solid wall of color, similar to paint. Dyes and pigments have different properties and are used to create different effects. Pigments also are not as susceptible to color fade as are dyes.
Dyes are available in both liquid and powder form.
Dyes give a candle a translucent effect and offer the candle maker a large degree of control over the shade of the color being used. Because pigments are color particles, they will clog a wick if burned. This makes them unsuitable for a candle that is colored throughout and meant to be burned. However, a candle can be burned if the pigment coats the outside of the candle and thus won't affect the wick. Dyes are easily combustible and can be used throughout the candle.