No, it is not by the color of your luggage tags. It is approximately by the age of the youngest child in your party. The rotations are roughly assigned by infants/preschoolers, elementary age children, and older children/adults only. Then the
DCL computer does it's magic and decides based on the guest list for that cruise exactly where to draw the lines.
Personally, as my child has gotten older, I really enjoy not being in the dining room with a lot of fussy little ones (yes, I do remember that I was once the mom of a little one.) Since we normally travel as a mother/daughter team, we are sometimes seated with others. DCL has done a wonderful job of seating us with an appropriate group--always another girl within a year or so of DD's age or (more recently) a table of adults where my DD is just fine and can hold her own in conversation.
Note--if you want to be seated with just your family, let DCL know this ahead of time. If you allow them to arrange seating and there is a problem with your table mates, let the head server know and you will be permanently reassigned.
We did see one table where there was a very inappropriate man travelling alone--the situation was quickly taken care of by the staff. We've never personally had a problem, but it's nice to know that they do deal with it quickly and appropriately.