This effect makes the blurred layer look like some colored liquid.
Liquid FX consists of two layers - the base and the effect layer itself.
The base layer is rendered to the texture and has a Blur effect, and the Blur diameter is the value that directly affects the result.
The base layer is computing as a black and white image, so it does not make sense to add color to it. MetaLiquid translates black and white colors into color and alpha gradients.
Color and alpha gradients are configured as parameters of Liquid node. Also in the node settings there is a choice of the mapping method: spherical or linear.
The node works as NoLight material, so it can be applied to any object. You can also try adding Feedback FX, then the result will be even more interesting.