To answer your main question, they fought in field grey in WWII as this was the same colour uniform they used in WWI (1) and armies can identify strongly with the colour of a uniform.

Note that not all Germans wore field grey. Panzer troops wore black, and the tropical uniform was olive drab (2) while some Waffen SS units wore mottled camoflage smocks (3).

As to its practicality, I cant imagine it was anything but comparable to the greens, blues, khakis, or browns of the various other armies.

(1)ref The Imperial German Armies in Field Grey Seen Through Period Photographs • 1907-1918: Volume 1: Uniforms, Headgear, Weapons, Gas Warfare, Telephone and Communications Equipment Johan Somers (2) Ref just about any google image search (3) Ref The SS A New History - Adrian Weale

As mentioned above, it's actually a peculiar shade - or family of shades, as it varied from one run of cloth to another - called feldgrau. This is, generally speaking, a grey-green color, with a touch of blue or brown. It is not a stark, sterile stone grey. The fact that it is perceived as such probably, as with so many other historical misconceptions, goes back to Hollywood. The famous war pictures of the 1950s and 1960s made extensive use of surplus American uniforms and equipment. Thus, you generally get a fairly accurate image of the American soldier. Not so for the German. Without these stocks of originals to issue, various expedients were used: converted East German uniforms, rubber-soled smooth leather jackboots, very cheap knockoffs, etc. They also displayed a real preference (or perhaps costuming knew no better) for always depicting the Germans in the more elaborate early-war uniforms: the bottle green collars, the stone grey straight-legged trousers, the aforementioned jackboots; all three of which had been phased out of production by the time the first American landed in Europe.