I think the chart directions with the K1 MC, P1 CC color etc. are for doing double knitting. That is where you are knitting two layers at once. I don't know much about double knitting, if you really want to do double knitting send a private message to Of Troy, she is our resident expert on double knitting.
If you just want to use that chart to do a design like that in regular knitting just knit each stitch once in the color you see on the chart. If you are knitting back and forth remember that that the knit rows are worked right to left and on the purl rows you read the chart from left to right, and of course you would purl back if you are doing stockinette. If you are working in the round you read all rows right to left.