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Ok. So the computer gives colors 3 parameters (besides alpha).
Red
Green
and Blue

MS-Paint gives you another way to adjust a color.
Hue
Saturation
Lumination

I know lumination works by decreasing the red green and blue values, but how do the saturation and hue values work?

It's kind of complicated. The actual luminance from a pixel, with standard gamma goes approximately as the square of the pixel value (r,g and b values)
The luminance total will be something like const1*r^2+const2*g^2+const3*b^2

If you think of a 3d space with coordinates r,g,b, then constant luminance surfaces are like ellipsoidal shells about the origin.

If you convert, using gamma, to a space where r` is proportional to the red luminance etc, then surfaces of constant luminance are r+g+b=const planes.

Imagine the line r=g=b- the line through greys. Looking in this direction from the origin, it looks kind of like a colour wheel- the angle around it is the hue, and saturation increases, for constant luminance, as you move away from the centre r=g=b. The actual working definition of hue and saturation varies i guess.

Look it up somewhere, or experiment with your paint program. Don't trust my hazy layman's rantings too much.