Y colorín colorado este cuento se ha acabado. What does

Y colorín colorado este cuento se ha acabado.

What does “colorín colorado” mean?

Well, it’s just a conventional way to finish a children’s tale, for the sake of the rhyme.
“Colorín colorado” can be literally translated as “little red color”, notice that “colorado” is an alternative name for “rojo”. “Colorín” is a diminutive form of “color”.

As children, we enjoyed adding a further verse to the conventional ending, because it included a “bad” word:

Colorín colorado
este cuento se ha acabado
y quien no levante el culo, se queda pegado.
[Whoever doesn’t lift their ass, will get stuck]

Everybody hurried to stand up after hearing that.

Thanks its sounds like its similar to “and they all lived happily ever after” in English.

Yes. An alternative ending, closer to the English version is:
Fueron felices y comieron perdices [= quail]