My current task is to write up a Games Design Document. It's like writing a kind of rule book, not just for how to play the game, but how to make the game. I think the easiest way to think of it is to imagine that you were writing out how to play Chess, you'd have to write what each piece can move like, how pieces take each other, the objective (take the king), additional rules (such as when pawns reach the opposite side of the board) and what each piece and the board looks like.
The amount of detail required to describe a typical modern video game is pretty astounding. Even though Palette Battle seems like a simple concept, getting down all the rules is remarkably complicated!