One of the greatest worries inhibiting people decorating small spaces is the use of colors. The urban legend of color making a small room look smaller is based on just a tiny bit of fact that's been blown way out of proportion. Color is one of the best ways to anchor a room, and to define it. Let's look at several ways to use color wisely in small spaces.
Dissolve the lines between two rooms by continuing a single color theme through both.
While this technique is clearly applicable to rooms that open to each other -- a kitchen to a family room, for example -- it's effective for rooms that simply fall in the same line of sight.
Living rooms with an arched opening to the dining room, kitchens that flow into dining rooms, bedrooms with a small office attached can all benefit from sharing color schemes. If you've got a favorite color combination, consider using it in all the public spaces in a small house -- living room, kitchen, dining area, hallways, and bathrooms -- to maintain a visual flow throughout the house.