The first generation Pokémon video games are known as Pokémon Red and Green in Japan, but the rest of the world got Pokémon Red and Blue. This seemingly arbitrary name change was actually Game Freak's attempt to appeal to a North American audience by using the colors of the U.S. flag.
Pokémon Red and Green first launched in 1996. The original version of Pokémon Blue was an updated, Japanese version of Pokémon Red and Green, which fixed a number of glitches and improved the aesthetics of the games. Pokémon Blue then formed the basis for the international versions of the original Pokémon games.
Since the international versions also released as two games instead of all three, many fans may wonder why the first Pokémon games weren't also called Pokémon Red and Green outside of Japan. The coloring was kept for the Kanto remakes on the Game Boy Advance, after all, as Pokémon FireRed and LeafGreen were the titles used all around the world, but the original Pokémon Green was left in its homeland. The most recent Kanto remakes, the Pokémon: Let's Go! games, abandoned the color-based name scheme altogether.
Pokémon Red & Blue Changed Titles To Appeal To Americans
In a 1999 post on Game Freak's official website (via Internet Archive), the company explained red and blue were chosen over red and green in an attempt to appeal to an American audience, since the colors matched those of the American flag. Regardless of the initial motivation, the choice makes a lot of sense, generally, as red and blue are often used to indicate opposing sides in things like sports.
The decision to rename Pokémon Red and Green to Pokémon Red and Blue didn't have much of an effect on the series, overall. Pokémon Green became the subject of the internet rumor mill during the early days of the franchise, with people claiming it contained everything from a catchable Mew to a Lavender Town theme that caused deaths. Nowadays, the truth about Pokémon Green is commonly known among the fans: They didn't miss out on much by not being able to experience it. Fans are lucky localizers didn't get their way when trying to make other changes, as there was discussion of odd ideas like turning Pikachu into a catgirl with breasts. Pokémon Green turning into Pokémon Blue is a small price to pay to avoid a Pokémon franchise that resembles Cats.
Source: Game Freak/Internet Archive