There's a few factors at play, this isn't an exhaustive look, but just what came to my mind when reading your post.
1. Contrast. On a really small model, you tend to want to exaggerate contrast in a less than realistic manner because realistic levels of contrast tend to look too plain the smaller you go. As you make the subject larger, I think you tend to want to prefer realism over exaggerated contrast.
2. Shading/highlights. This is similar to the first point, but talking about a single colour area rather than the model as a whole. A colour will tend to look flatter the smaller you go, so you often want to exaggerate shadows and highlights.
3. Scale effect. This is where things tend to look darker the smaller the model. If you paint a small scale plane or a car model in the exact paint that is applied to the real thing, it will tend to look too dark. The links below explain it a bit. Basically the further away from an object you are, the more pale it tends to look (some explanations I've heard don't sound right, but anyway). This means on a small model, say 1/72, viewing it from 1 metre/yard away you want it to look like the real thing at 72 metres/yards away, to achieve that you need to use slightly paler colours.
I've noticed this effect if I paint a model, like a Spitfire, at 1/32 and use the exact same colours on a 1/72 model, they won't look right when I place them side by side, the smaller one will look too dark or the larger one will look too light.
Of course wargamers tend to not care so much about scale effect, and tend to prefer making colours more vibrant to compensate rather than making them more pale.
http://www.009.cd2.com/members/how_to/colour.htm
http://www.cybermodeler.com/color/scale_effect.shtml