The purpose of conducting a "Color Code Dots" activity during an iteration retrospective is to gather feedback from team members on various aspects of the iteration, such as strengths, weaknesses, and potential improvements. Each team member is given a certain number of colored dots and asked to place them on a board, with each color representing a different category (such as communication or process). This visual representation allows the team to quickly identify areas of focus for future iterations and discuss specific feedback in a constructive manner. Overall, the activity helps to promote increased communication and collaboration within the team.