babiegoose.com

gray:
O.E. gręg (Mercian grei), from P.Gmc. *gręwyaz (cf. O.N. grar, O.Fris. gre, Du. graw, Ger. grau), from PIE *ghreghwos, but no certain cognates outside Gmc. The distinction between British grey and U.S. gray developed 20c. Gray as figurative for "Southern troops in the U.S. Civil War" is first recorded 1863, in reference to their uniform color [from Online Etymology Dictionary]

so in other words...

gray is a color, whereas grey is a colour...