Magatama are jewels worn as earrings by all Toushi which contain the spirits and essence of warriors from the era of the Three Kingdoms in ancient China. How they all wound up in Japan is a mystery.
Magatama impart their power and fate upon each Toushi (regardless of age or gender) which range from average to incredibly powerful but come with the will of the spirit within and ultimately their fate, which usually tends to be tragic and painful.
However, a few seem to be in the process of defeating their fates (or have already done so), even though the cycle has played over repeatedly for 1800 years. Not every fate is the same however; numerous important characters are missing, and some relationships and obviously personalities have been drastically altered, but the end results are significantly analogous.
Some magatama are very selective; others can switch their magatamas increasing their own personal power. They also indicate a Toushi's skill and power by a distinctive color related to the Olympic medal system, which often tends to be misleading with certain characters.
The ambiguity of it is further enhanced by the introduction of Hakufu's jade magatama (which was briefly replaced with a red when she was possessed by Toutaku).
Here is a the colour list for Magatama based upon the General Rank system.
Rank U - White Magatama
Rank G - Pink Magatama
Rank F - Purple Magatama
Rank E - Blue Magatama
Rank D - Green Magatama
Rank C - Yellow Magatama
Rank B - Orange Magatama
Rank A - Red Magatama
Rank S - Bronze Magatama
Rank SS - Silver Magatama
Rank SSS - Gold Magatama