Using formula field

I was very much impressed by the sample application thta showed thumbnail image preview.
So,i copied the application and tried to get an understanding how html tags can be worked within the formula field

When I add a new form to "copy of image thumbnail preview"
and use the formula field to display

"Green"

--- works perfect... "green" is showed in green in the "view"

But when i create a new application
and add a formula field to it

"Green" ---

the view shows this entire html code as plain text ... just as exactly i have written in the edit mode of formula field.

Am i doing something wrong here ??
I would really love to use this...
I am still learning...

Thank you for your time and patience
Regards,