What evidences this technique of visualizing different color words in sequence, to help you sleep? What's this technique called? Any evidence? 


  I'll make it easier. Visualize the word Red. In big red letters. Examine your creation but don't judge harshly. After a few seconds, switch to the word Blue, in blue letters. Then again with Green. Now repeat the sequence or feel free to wander off into any pattern of colors.
  
  This is how it works. You can't think and feel at the same time (by feeling I mean any of the senses including vision) so exercising your vision causes your brain to shut down. You can do the same by listening intently, etc.
  
  This has usefulness beyond relaxing enough to fall asleep. I have a theory that high level problem solving requires switching to feelings. We feel our way through tough problems because conventional thinking is too tedious, inefficient.
  
  BTW, you now know how to meditate.
Imagery Distraction

The technique referred to is called 'imagery distraction' (Harvey &amp; Payne, 2002).

Some evidence has been found for “imagery distraction” being associated with shorter sleep onset latency and less frequent and distressing pre-sleep cognitive activity.


  The success of the “imagery distraction” task is attributed to it occupying sufficient “cognitive space” to keep the individual from re-engaging with thoughts, worries, and concerns during the pre-sleep period.


The type of imagery seems less important.  So visualizing coloured words should be equally as effective as counting sheep.

Harvey, A. G., &amp; Payne, S. (2002). The management of unwanted pre-sleep thoughts in insomnia: distraction with imagery versus general distraction. Behaviour Research and Therapy, 40(3), 267–277. doi:10.1016/s0005-7967(01)00012-2