According to the Oxford English Dictionary, the word COLONY derived from the Latin word for farmer, cultivator, planter, or settler in a new country ( colon-us).
Colonia had thus the senses of "farm," "landed estate," "settlement," and was esp. the proper term for a public settlement of Roman citizens in a hostile or newly conquered country, where they, retaining their Roman citizenship, received lands, and acted as a garrison, being mostly formed of veteran soldiers who had served their time; hence it was applied to the place so occupied, or to towns which were raised to the same rank and privileges. Among the nine Roman coloniæ in Britain, were London, Bath, Chester, Lincoln. The
Romanwriters further used their word colonia to trans late Gr. apoikiaa settlement of apoikoi, lit, "people from home," i.e. a body of emigrants who settled abroad as an independent self-governed polij or state, unconnected with the mother city save by religious ties. . . Its modern application to the planting of settlements, after Roman or Greek precedents, in newly discovered lands, was made, in the 16th c., by Latin and Italian writers, whose works were rendered into English by Richard Eden.
The related term COLONIAL is explained by the OED as "Of, belonging to, or relating to a colony, or (
spec.) the British colonies; in American history, of or belonging to the thirteen British colonies which became the United States, or to the time while they were still colonies. Now freq. derogatory."
COLONIALISM, according to the OED, means (1) "The practice or manner of things colonial" and often serves as a synonym for "provincial;" (2) "The colonial system or principle. Now freq. used in the derogatory sense of an alleged policy of exploitation of backward or weak peoples by a large power."