The problem was 3rd party developers/publishers make the games in greyish hue as a standard. They didnt make the games more colorful than it already is, or they just make this because of the hardware's limitations just as third party developers makes pre-rendered backgrounds with playstation games before?

I was just playing Gears actually, and everything was pretty much grey/gray and brown. The shades of brown either got brighter or darker. The campaign isn't a page-turner either. I wasn't expecting a story anyways.

Bioshock is dark and very colorful in the same time. Halo 3 is colorful too. One of a few colorful FPS out there. Hey what is the problem with gray? Most shooters are dark and this is how I loved them. Gears actually looks brown. Condemned is gray and MGS 4 - looks green to me.

I don't see problem with grey filters in games , Killzone 2 still looks great. Grey enables the developers to create atmosppere , it's very dull,gloomy,saddening but that's exactly what warfare is like.

LOL @ wanting colourfull warfare , different colour schemes suit different situations.

There are many problems with grey, look at this video the conduit,this have better colors and more colors than killzone 2 and gears of war:

http://wii.ign.com/dor/objects/14248157/the-conduit/videos/conduit_trailer_051608.html

and it have dark setting.

Because there isn't colors. /sarcasm

I agree there shouldn't be too many colors, but to say all grey or all brown=war you are wrong.  

It depends on where you're deployed.

In the desert, everything is in warm hues due to all the sand and the amount of sunlight.

In the rain forest, lots of greens and browns due to the foliage.

In urban environments, generally more greys and subdued colors.

In an urban, destroyed environment, there is a lot of dust and soot everywhere, even covering the ground. Imagine images of NYC post 9/11 or any urban area after a heavy artillary barrage or airstrike. If you are in an area that is still hot with active shelling, even the air will be thick with dust from destroyed building materials.

As for the blood issue, only fresh arterial blood is bright red. But even that in poor lighting will look blacker. Venous blood is much darker overall. As blood dries and congeals, it blackens when thick, and turns a rusty/brown color when smeared. Only wet, pooled blood still looks red.

But all attempts to mimic realism aside, color pallets and filters are simply used by the developers to set moods and convey context of a given situation. It is an art direction call.

The film industry has been doing this for ages, so it's no surprise with the advances in hardware lighting that game developers would do the same. Even if you don't notice it, cinematographers regularly rely upon filters to convey everything from time of day to mood, tone, etc.

 You chosed the wrong war :P

Grey is the UK spelling; gray is the US spelling.

http://en.wikipedia.org/wiki/American_and_British_English_spelling_differences#Miscellaneous_spelling_differences