Code blue is a phrase apparently to be used by any Galactica crewmember who identifies a Cylon aboard.
Chief Galen Tyrol forcefully shouts "Code blue!" once he sees what he knew to be a second copy of Brother Cavil step off one of the Raptors returning from the Caprica SAR for the resistance. To the Colonial's knowledge, Cavil wasn't assigned on the SAR, and the priest had been giving counsel to Tyrol at the time of the mission (Lay Down Your Burdens, Part II).
The podcast for "Lay Down Your Burdens, Part II" says the term is what someone would be shouting "if you saw a Cylon and you knew it." Moore explains the term was chosen because "code red" was too reminiscent of [[Wikipedia:Star Trek|Star Trek's "red alert."