As stated, the first two slots of the palette decides on your spell, while the last three slots are modifiers.

We'll call the first slot of the palette the "base", and the second slot the "side" element.

The base element will determine the TYPE of attack.
Earth and Ice are projectiles. Fire, Water, Steam and Cold are streams. Arcane and Life are beams. Lightning (or Electricity) is hitscan, and the Shield is as self-explanatory as it gets.

Side elements will affect what your spells do when you get past the initial effects of the base element.
I'm not going to spoil much on it.

Now, I will tell you what each modifier does.

ALL Modifiers stack EXPONENTIALLY. This may result in overkill, but may be useful in certain scenarios. The best mages will know exactly what modifiers to use!

Arcane Damage = +75%
Arcane Force = +50%
Arcane Radius = +50%

Cold Damage = +25%
Cold Radius = +50%

Earth Force = +75%

Fire Damage = +25%
Fire Radius = +100%

Ice Damage = +50%

Life Damage = -25%
Life Healing = +25%

Lightning Damage = +100%
Lightning Force = +50%

Shield Duration = +50%

Steam Damage = +25%
Steam Duration = +25%

Water Force = +50%