Our bodies are made up of billions of cells that grow, divide, and then die in a predictable manner. Cancer occurs when something goes wrong with this system, causing uncontrolled cell division and growth. Chemotherapy literally means "chemical treatment" and is one way to help the body kill off cancer cells and try to keep them from dividing (making more of themselves).
The reason people tend to lose their hair during chemotherapy is that many chemo drugs don't discriminate: They target all cells that divide rapidly. Our hair falls out all the time. We just don't usually notice because our hair cells reproduce quickly and make more to replace what we've lost. But when a chemo drug reduces rapid cell division across the board, the "good" cells end up taking one for the team.
Chemotherapy is sometimes recommended for stage 2 colon cancer, and usually recommended for stage 3 and stage 4 colon cancer in combination with biologic therapies that specifically target cancer cells. Please explore the Colon Cancer Drug Index to learn about the variety of drugs available.
Source: "Detailed Guide: Colon and Rectum Cancer: How Is Colorectal Cancer Treated?" American Cancer Society 22 Feb. 2006. Accessed 21 Jul. 2007 [http://www.cancer.org/docroot/CRI/content/CRI_2_4_4x_How_is_colorectal_cancer_treated_10.asp?sitearea=].