Laudator Temporis Acti

It was a bit of a shock to see Osama Bin Laden with a black beard in his recent 2007 video, because his beard was streaked with gray in his previous 2004 video. I'm just a kafir, but when I see an old man who dyes his hair or beard, I think of Martial 3.43:

You pretend to be young, Laetinus, with your dyed hair, so suddenly a raven, when lately you were a swan. You don't deceive everyone; Proserpina [goddess of death] knows that you are white-haired: she will rip the mask from your face.

Mentiris iuvenem tinctis, Laetine, capillis,
  tam subito corvus, qui modo cycnus eras.
Non omnes fallis; scit te Proserpina canum:
  personam capiti detrahet illa tuo.

Apparently it is lawful to dye the hair. See Yusuf al-Qaradawi, The Lawful and Prohibited in Islam, chapter 2 (The Halal And The Haram In The Private Life of Muslims), section 2 (Clothing and Adornment), sub-section on Dyeing the Hair:

Another aspect of beautification relates to dyeing the gray hair of the head or the beard. It was reported that the Jews and Christians refrained from dyeing the hair, regarding such beautification and adornment as contrary to piety and devotion, and not befitting rabbis, priests, and ascetics. The Prophet (peace be on him) forbade Muslims to imitate these people or follow their ways, in order that Muslims might develop their own distinctive and independent characteristics in appearance and behavior.

Al-Bukhari, on the authority of Abu Hurairah, reported the Messenger of Allah (peace be on him) as saying, "The Jews and Christians do not dye their hair, so be different from them." (Reported in al-Bukhari's chapter on "Dyeing the Hair" in his book Clothing.) This is, however, not a command but only a recommendation, as is evident from the actions of the sahabah, such as Abu Bakr and 'Umar, who used to dye their hair, while others, such as 'All, Ubay ibn Ka'b, and Anas did not.

The question now remains as to what type of dye is to be used. Should its color be black or can there be other colors? Or should black be avoided? If a man is of a very advanced age, with white hair and beard, it would hardly be appropriate for him to use black dye. On the day of the conquest of Makkah, Abu Bakr brought his aged father, Abu Qahafah, carrying him until he had seated him in front of the Prophet (peace be on him). On seeing Abu Qahafah's snow-white hair, the Prophet (peace be on him) said, "Change this, but avoid black." (Fath al-Bari, in explaining the above mentioned hadith (in the chapter on "Dyeing) However, if a man is not of such advanced age or feebleness as Abu Qahafah then was, there is no harm in his using black dye. In this regard al-Zuhri said, "We dyed our hair black when the face looked young, but discarded it when the face became wrinkled and the teeth decayed."(Reported by Ibn Abu 'Asim in the book on "Dyeing the Hair.")

Some of the early Muslims, including some sahabah such as Sa'd ibn Abi Waqqas, 'Uqbah ibn 'Amr, al-Hassan, al-Hussein, Jarir, and others permitted the use of black dye. Some scholars, on the other hand, do not consider the use of black hair dye as permissible except during time of war, when the enemy might be impressed by the fact that all the soldiers of the Muslim army look young.

Abu Dharr narrated the hadith, The best thing with which to dye gray hair is henna and katm. (Mentioned in Fath al-Bari.) Henna makes the hair red, while katm, a plant from Yemen, colors it black tinged with red. Said Anas, "Abu Bakr dyed his hair with henna and katm, and 'Umar dyed it with henna only."