Note: showing colors in terminals is done through ANSI codes which have varying levels of compatibility with different terminals. For me, this works on an iTerm terminal, with $TERM set to xterm-256color.

Yeah that was the problem. I realized that Snow Leopard's default terminal doesn't have support for ANSI colors..I think. Anyways, if you're on Snow Leopard or earlier versions of Mac OSX, you need to use iTerm2. Also, to make the PS1 smaller, you can delete the two lines in the last method (the constructor I think) that prints the hostname and user. So, delete or comment:

   p.append(' \u ', 250, 240)
   p.append(' \h ', 250, 238)

Yup, just remove/comment out any portions (Powerline calls it segments) you don't like.