VS Code highlight modified lines

This is connected with your file being under revision control. If you have your files in git and open the folder in VS Code. You will see the colors depending on the change you've made.

Check section about Gutter indicators.

I had the same problem try launching vscode in terminal like: code your-project-dictionary. If code command cannot be found, enable code in shell: Open VSCode press CMD+Shift+P. A dialog will be shown: Type in "shell" and click on Shell Command: Install 'code' command in PATH. Now you can launch VSCode in terminal. This solved my issue with highlighting changed files on VSC Project Structure!