If its twice as many colours as the human eye can see:

1) How did they design it?

2) there is no way of ever testing this so it should fall foul of trade descriptions

3) what happens if it selects a colour or hue that the eye cannot perceive, this would be perceived as a dead-pixel and prompt a warranty return surely?

1 & 2) There are plenty of instruments available which are capable of measuring light with a higher resolution than the human eye. By way of analogy, just because you can't see radio waves doesn't mean they don't exist.

3) It doesn't produce light that the eye cannot perceive - it is simply capable of producing finer graduations in colour, brightness and/or saturation than the eye can perceive.

The monitor you used to type your message can also display more colours than the eye can see, unless you typed your message on an old Amstrad 8256. Its nothing new so welcome to 1995.