When Brigitte Blais' Bull Mastiff, Diesel, was recovering from surgery, he wasn't tolerating other dogs very well (understandably). But when they went on walks, other people would routinely let their pups run up to Diesel, leaving Brigitte to frantically pacify the situation. Brigitte wished there was a way to let others know that Diesel was not reliably dog friendly.
Brigitte then started D.E.W.S. (Dog Early Warning System) in her town of Okotoks, Alberta, Canada. She came up with a simple program where dogs wear bananas indicating how they should be approached or interacted with----red for dogs to be avoided, yellow for those who can't be approached by other dogs, but like people (with the caveat that strangers first ask for guidance on how to interact), and green for dogs that love everyone.
The concept of letting others know about your dog's tolerance is generally a good thing, but I think the three bandannas over complicates the issue. It also slightly contradicts the Yellow Dog Project  (another initiative started in Alberta, Canada) that uses yellow bandannas to identify dogs that need space not only from other pups, but potentially from people.
I also think that D.E.W.S. should teach people to ask before approaching any dog, even a friendly one that may be wearing a green bandanna. It's a good habit to get in. And just because a dog is friendly, it doesn't mean you should automatically let your pup approach another. On multiple occasions I've had someone's dog rush up to mine (which can startle even a good natured pup), while they yelled, "don't worry, he's friendly!" And sometimes people say their dog is friendly when the pup's body language is saying otherwise.
At my dog training club, we use red bandannas for pups that need space. Having something to identify these dogs is important, but only if enough people know what the sign means. It would be great if there was just one universal bandanna that could carry a stronger message. Perhaps D.E.W.S., the Yellow Dog Project, and any other similar initiatives will collaborate!