Paintballs are used in a Color Applicator - Empty in order to paint colorable blocks like cables, wool, terracotta, glass, and concrete. They can also be used in a Matter Cannon to shoot little splotches of paint.
8 matter balls around a dye
They act identically to regular paintballs but the splotches emit light when shot out of a Matter Cannon. Useful as a sort of flaregun I guess.
8 paintballs around a glowstone dust