All of the code is original, though: nothing was actually taken from Pokémon Fusion, apart from the idea. The idea and part of the layout were used as a base to create this ponified version. Pony Fusion is heavily inspired by Pokémon Fusion.
So it takes the colors from one pony, and then dyes another pony with it? Basically. Voilà! You'll get a brand new pony with some weird colors.
With the list on the right, you pick which pony's color scheme you want to use. With the list on the left, you pick which pony you want to recolor. What does this thing even do? It applies the color scheme of one pony to another pony. Note: in this FAQ, the term ponies also refers to zebras, dragons, cats, and other various animals.