"Prefer 4:4:4 color" is a setting available for Warp and Teams customers that improves the color volume (chroma subsampling) of the stream. It is helpful in situations where color clarity is important, like graphic design, video/photo editing, animation and colored text rendering.
The default Parsec stream is in 4:2:0, which is the standard for video encoding. It reduces the amount of chroma (color) information while keeping luma (brightness) intact, in order to reduce the amount of data used. 4:4:4 on the other hand keeps the chroma information intact. You can learn more about chroma subsampling here.
4:4:4 is only supported by NVIDIA hosts running GTX 900 (Maxwell), GTX 1000 (Pascal), RTX 2000 (Turing), and RTX 3000 (Ampere) consumer graphics cards, and their respective Quadro workstation cards. Using 4:4:4 with H.265 requires a GTX 1000 (Pascal) card or newer. The person joining just needs a Windows/Mac/Linux machine.
4:4:4 color is significantly more performance hungry than the regular Parsec stream (4:2:0), as it uses software decode (CPU) on the client side. This means performance or battery life on the client may be lesser when using this feature.
To turn on this feature, toggle on "Prefer 4:4:4 Color" in the client overlay. You can check what color mode is being used next to the latencies in the overlay.