It's just a separator between the two semantic halves of a declaration. It could just be a space, but it wouldn't be quite as obvious. Compare "display block;" to "display:block;"

It wouldn't save characters, either - you can omit spaces around the colon today and have the same number. That is, "display block" and "display:block" are both 13 chars.

There is indeed nothing requiring a colon vs a space, as the grammar is unambiguous either way.

CSS presumably uses the colon for clarity.