The point being made here is that Shakespeare took a word, incarnadine, which had previously meant "color de carne", and changed it for his own (aesthetic? metric?) purposes to mean "color de sangre." In other words, he supposedly did not "pay attention" to its etymological meaning. But in fact, he "turned the word inside out". Flesh-colored had previously meant the color of flesh from the outside; Shakespeare made it the color of flesh from the inside (red), just as Lady Macbeth's world was turned inside out by her crime.

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Note added at 14 mins (2006-05-24 15:14:46 GMT)
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Will all great Neptune's ocean wash this blood

Clean from my hand? No; this my hand will rather

The multitudinous seas incarnadine,

Making the green one red.

--Macbeth, II.ii

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Note added at 20 mins (2006-05-24 15:20:46 GMT)
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Also, the word was an adjective when he found it, and he turned it into a verb. Again, apparently not "paying attention" to the word, but in reality using words as a great painter uses colors, in unexpected ways. Sir Max Beerbohm once wrote that "in Shakespeare, every word casts a purple shadow."