I understand which colors go to which, but why is it taht only 3 wires are required for 4 spark plugs/wires? I assume this has to do with the wasted spark setting - but can someone explain how that works?

 

The leading spark plugs fire at the same time off of one signal in wasted spark configuration. So one of the plugs fires into a compressed mixture and one into exhaust. Trailing is a coil per plug setup because it is positioned in such a way that wasted spark won't work.

Ken