Here I will explain what is it the velocity chart in TFS 2012 shows. Generally - velocity shows how much a team can do during a sprint.
So it comes to - how do you estimate effort. IN TFS 2012 we use User Stories, and for estimates - Story Points. This is essential to remember. Look here, an example of velocity chart:
Y-axis. See numbers? Those are story points. If your work items do not have story points - they will not appear on this chart.
Now about colours. Green shows work items in Resolved\Completed\Done state. Blue - Active. Other states are not shown.
Hope that clarifies some things.