They pull this off by giving each color its own layer in the screen, and then stacking the layers on top of each other. This gives the screen 3 layers, not one, so there are downsides. But one upside is that this screen doesn't have the filter layer that E-ink and PlasticLogic use on their color screen.
Edit: Some details above were incorrect. This screen has a single layer with all 3 colors in that layer. The white color is the suspension fluid for that layer. When one or more of the color particles are at the front, they reflect light and you can see them. When they are against the back of the screen all you see is the white particles. When all 3 colors are against the front of the screen you will see black.
The Fuji Xerox screen is also higher resolution because it lacks that filter layer. The demo screen at SID Display Week reportedly measured 5" across, and it had a resolution of 800x600. If E-ink showed off screen the best they could do is 400x300. Their screen would lose resolution because of the RGBW filter layer that has to lie on top of the screen (I explain why in my post about Plastic Logic's color screen).
The demo screen shown at SID Display Week reportedly only has 2 colors, not 3, and according to TechOn the colors demonstrated are red and cyan (not red, green, and blue). Fuji Xerox is also working on a related epaper based on cyan, magenta and yellow.
This firm has been working on screen tech since at least 2005, and probably before. This looks to be one of the main places Xerox has been developing epaper ever since they closed down Gyricon, an E-ink competitor, in 2005. Interesting footnote: Gyricon grew out of research at MIT right around the same time as E-ink's screen tech was beginning to be invented at MIT. It's similar in certain ways to E-ink, only Xerox didn't think they could produce it cheap enough that anyone would buy it, so theykilled it off (in 2005, I believe).