When you mix a solid into a liquid, you can get a solution (where the solid dissolves in the liquid, like salt in water) or you can get a suspension (where small particles of the solid float around in the liquid). Normally, in a suspension, the particles are large enough that most of them settle out, but in a colloid, they are small enough that they stay suspended. You see a similar thing with mixing two liquids. If they are miscible (ie, they dissolve in one another, like water and alcohol), you get a solution. If they are not, like oil and water, normally they will separate. This is why you need to shake your vinaigrette before using. However, if the droplets of oil are small enough, they stay suspended. A good example of this is homogenized milk, where the fat droplets are so small that they don't separate out. tl;dr: Colloidal oatmeal is simply oatmeal ground fine enough to stay suspended in water. It's not a magic substance that needs particularly fancy processing or anything. However, if your blender is crap (like mine), you'll need to do smaller batches.