But the basic design, started as a way to show a UNITED COLONIAL SUPPORT, thus the 13 stripes. Now the first US Flag the "Grand Union Flag" seems to have been developed in New England, with the 13 stripes and the British Union Jack nearest the Staff (This is called the "Canton" of the Flag). The Staff position was considered the most important part of any flag design.
Sometime after 1775 (and apparently even before the Declaration of Independence) they was a move to replace the British Union Jack with something. Thus the Stars were adopted (Apparently the flag "canton" was dyed so that the British Union Jack was removed and the 13 stars put in the Canton to replace it).
Now on June 14, 1777 the present flag was officially adopted by Congress (Through it seems to have been in use unofficially for over a year before hand).
Given this history, to understand the colors of the Flag, you must understand the Colors in the British Union Jack. The Union Jack of 1606, in use in 1775-1783 period (The Irish flag was added to the Union Jack in 1801 producing today's Flag of the United Kingdom) consisted of merging two flags, the White Cross on a blue field Flag of Scotland with the Red Cross on a white Field which was the flag of England. In affect the Red, White and Blue of the US Flag is derived DIRECTLY FROM THE BRITISH UNION JACK.
The British Union Jack consisted of a Flag of England superimposed on the Flag of Scotland (In the 1790s, a red stripe was added to the White point to point cross strip of Scotland to represent the Red Strips on White Field flag of Scotland).
Thus the COLORS were adopted directly from the British Flag. Now why red and whites strips instead of blue and red strips? This seems to have been a deliberate decision of New Englanders. The Puritans were the most powerful in New England, and they had backed Oliver Cromwell during the English Civil War of 1640-1660. During that war, blue was the color of his forces (Thus the Phase "True Blue" which is still in our lexicon), while Red was the Color of the King's forces.
In 1775 New Englanders wanted and needed support from the rest of the American Colonies, thus the decision NOT to use Blue in the Stripes. Blue was to much of a color of open Rebellion, something even New England was not willing to do without the support of the rest of the Colonies.
Now once it was decided that an open break with Britain was what was needed, blue became a fully acceptable color, but by that time the Red and White Stripes had already become the norm for US flags and was kept. A different Color from both was needed in the Canton and once Stars were decided to replace the British Union Jack, expanding the blue field of the underlying flag of Scotland was to easy NOT to do (remember flags at this time periods were hand made and dyed, and thus reused and redyed as needed or till the flag was no longer usable and them it was destroyed).
Now one of the problems with deciding HOW the US flag evolved is the lack of any surviving flags of the Period. In fact the oldest US Flag known is a 15 stars and strip flag from 1795 (which had the 15 stars in a Circle). Thus most of the flags we seen that claim were used in the Revolution are from written description of the flags by people at the time they saw the flag, or from memory in their old age (Which can sometime give us want we want the flag to have been, as opposed to what it was).
Flag of Scotland:
http://www.crwflags.com/fotw/flags/gb-scotl.htmlFlag of England:
http://www.crwflags.com/fotw/flags/gb-eng.htmlSt Patrick's Flag (the Flag of Ireland 1782 - 1801, maybe before that date but records are weak) :
http://www.crwflags.com/fotw/flags/ie-stpat.html#spfNote: Today's Irish flag is a combination of the Green Flag of Catholic Ireland and the Orange Flag of Protestant Ireland with a white middle to show that Ireland included BOTH Groups.
Union Jack from 1606-1801:

Present British Union Jack:
http://www.crwflags.com/fotw/flags/gb.htmlThe Grand Union Flag:

One group of Historian suggest the red and white stripes were taken from the East Indian Company flag of the time period:
http://www.crwflags.com/fotw/flags/gb-eic.htmlUS Flags:
http://www.crwflags.com/fotw/flags/us.htmlColonial Flags:
http://www.crwflags.com/fotw/flags/us%5Erv.htmlWeb Sites for more on Flags:
http://www.crwflags.com/fotw/flags/iso3166.html#shttp://www.flags.net/