There are two different warning systems that affect Gran Canaria and the Canary Islands, issued by different government departments.

Local weather warnings

The Dirección General de Seguridad y Emergencias del Gobierno de Canarias is the local extreme weather warning system and is the one that the locals take most notice of. It is activated by unusual weather conditions as well as other incidents such as oil spills, forest fires and conditions that create high fire risks. Canary Government alerts tend to be detailed and are most often issued during the winter to cover episodes of strong rainfall and / or wind.

The alerts are issued on paper and don't use a colour code.

The Canary Government's weather alert system has three levels:

Prelalerta (prealert), alerta (alert) and alerta máxima (maximum alert).

Spanish weather warnings

The Agencia Estatal de Meteorología (AEMET) is the Spanish National Weather Service and it issues colour coded avisos if adverse weather phenomena are forecast.

AEMET avisos are automatically generated if exceptional weather is forecast, but it doesn't take the risk to the general population into account. For example, a temperature forecast of 34ºC or above triggers an automatic yellow aviso.

Other weather events that trigger avisos are exceptional waves, high levels of airborne dust, extreme temperatures and tropical storms.

Here's what the colours mean.

Green: No adverse weather forecast.

Yellow: No weather risk for the general population, although there may be risks associated with some activities and in areas vulnerable to the effects of adverse weather (such as large urban areas). 

Orange: There is significant weather risk (unusual weather conditions that could lead to risk to people going about everyday activities) .

Red: The weather is extremely risk ( extreme weather phenomena of exceptional intensity and a high level of risk to the general population). Panic!!

Alex says: While it may sometimes seem silly to issue a weather alert or warning when conditions don't seem to be all that extreme, remember that Gran Canaria rarely get's real weather and its infrastructure and locals aren't prepared for it. Better safe than sorry.

Source: Canarias 7 article and AEMET website