This stitch uses two threads in the same needle, in contrasting colors. The resulting Chain Stitch alternates the colors for each link.

At each stitch, both threads come out of the fabric. When you make the Chain Stitch, however, only catch one of the two threads under the needle. Since you insert the needle in the same place as it came out of the fabric at the beginning of the stitch, the other color will disappear. For the next stitch, loop the second color.