colony is an area or country controlled politically by another country.

No types of sponge live in large colonies, since sponge do not flourish in areas where much of the water has been filtered by other sponge.

Can you tell me what " large colonies " mean in THAT sentence ?

Colony also means a group of animals or plants. This is saying that sponges do not live in large groups.
use a good dictionary, such as


and try to understand ALL definitions there (including the one given at 3), not just one