The game mechanics are relatively similar to those of Dungeon Keeper. The only difference is that, instead of controlling an omnipresent being, you can only control your demonic lord directly. Other than that, it's quite similar: your troops can carry out tasks such as setting traps, mining resources or attacking enemies, and they will receive a wage for doing so.
You, on the other hand, can create all kinds of elements, as long as you use the appropriate materials and diagrams to do so. You can create things that range from torches to traps, including doors or shelves of books to teach your creatures.
Dungeon Colony is an excellent strategy game with complex and very fun mechanics, as well as very nice graphics. In the end, it's like a modern version of Dungeon Keeper with some extra splashes of action.