A colon has two uses in a sentence: to introduce a list, statement or phrase; and to connect two thoughts.

Using a colon before a list, statement or phrase:

Here are some examples of common ways to use a colon.
o   We needed three things from the store: milk, oranges and rice. (list)
o   They gave the new employees a stern warning: Never allow visitors to feed the animals. (statement)
o   There was one place she always avoided: the smoking area. (phrase)
Notice that the first part of each sentence above could stand alone as a complete sentence. In other words, the part before the colon is an independent clause.
A common mistake writers make with colons is to use one within a sentence where there is no break in the grammar. Remember that not all lists should have a colon before them.

Here are some common errors.
o   George’s favorite actors are: Samuel L. Jackson, Mel Gibson, and Harrison Ford.
o   She is allergic to animals, including: dogs, cats, and horses.
o   The children have many talents. For example: they can both sing, and they’re good at math.
To avoid errors like those above, do not use a colon after a be verb (is, are, was, were,…), after a preposition (of, by,…), after such as or including or after for instance or for example.

Here are correct examples. These sentences do not need colons.
o   The winners were Mary, Scott and Angelo.
o   The campers can choose three outdoor activities such as soccer, softball and swimming.
o   There are many ways to thicken soup. For instance, you can mix in cornstarch.

Using a colon to connect two thoughts:

A colon can be used to connect two related thoughts. When using a colon this way, the second thought explains or clarifies the first.
o   She is a biologist: she studies living things.
o   Air traffic controllers need to keep their minds focused: they have hundreds of lives in their hands.

A colon can also be used to introduce a quotation, if the sentence before the quotation is complete.
Correct: Consider President Kennedy’s words: “Liberty without learning is always in peril and learning without liberty is always in vain.”
Incorrect: According to Benjamin Franklin: “There never was a good war or a bad peace.” (To correct this sentence, use a comma instead of a colon.)

Adapted from: http://owl.ccd.edu/writ_resources/handouts/Colon_Exp.html