Traditionally the victor attaches the tassel to his banner, or gives it to his/her consort to attach to theirs because they inspired them to victory in honourable combat over the field.
That doesn't mean you can't make and wear your own tassels, just try not to display them in a way that infers you won them (eg. attached to your banner). Tassels can also be favours.
At Stormhold's Monthly Bash:
- Red = heavy fighter's tournament champion
- Yellow = rapier fighter's tournament champion
- Green = light fighting tournament champion
- Blue and yellow = most chivalric fighter
At other tournaments (not widely used any more, except in Stormhold)