Comment 6 for bug 875716

I have the exact same problem, your screenshot looks exactly like what I'm getting. I even tried capturing a photo with cheese, and the resulting image file has most of the colors missing too, it's not just the live video that has the issue.
I also get several these messages repeated when I start cheese from a shell:

(cheese:6237): Gtk-WARNING **: Attempting to add a widget with type GtkImage to a GtkButton, but as a GtkBin subclass a GtkButton can only contain one widget at a time; it already contains a widget of type GtkLabel

(cheese:6237): Gtk-WARNING **: Attempting to add a widget with type GtkHBox to a GtkToggleButton, but as a GtkBin subclass a GtkToggleButton can only contain one widget at a time; it already contains a widget of type GtkLabel