To put it as simply as possible (which isn't so simple),
Space Colony is best compared to a union of the games
The Sims and
X-Com. Basically, picture all of your lovable sims in a space station on a distant planet with killer aliens. On the one hand, they're trying to keep the place running so they can eat and breathe. On the other, they're trying to cope living a lifestyle where everyone acts like a caricature of almost any stereotype imaginable.
While every character in the game plays a part, you do not take the role of any of them. Instead, you act as their most trustworthy outlet to get things in order. You build the base structures, including such vital things as beds, disco floors, showers, hot tubs, etc. Once you have a functioning base, you assign tasks to the colonists, who will carry them out depending on a plethora of various circumstances.
The main plot of the game will land your colonists on various planets, and each planet is broken up into various missions. You carry your resources over from mission to mission, but you must start anew on every planet. You can also opt to skip the story line and play colony resort missions where you basically have to keep up a functioning colony and turn it into an attraction more popular than Disneyland.
There is also a Sandbox mode, equivalent to the one implemented in Stronghold, where you have no goals and an open plane to build on. Plenty of resources and no time limit make it easy to sit back and take care of one thing at a time so you can grow the outback jungle space colony you've always wanted to.
