Ritzy,
Welcome to the forum!
A a relative newbie to tropical fish, I was unaware of the process used to create these 'painted' fish until I was educated by others on the forum. Here is a excerpt from some information I found on web - it really opened my eyes to what the process does to the fish:
Small pockets of dye are injected just below the skin using a large gauge needle. The puncture wounds inflicted on these fish must be traumatic. Unlike a tatoo, the wound does not heal with the new pigment dispersed into surrounding cells, but the dye appears to remain liquid in the pockets where it was injected, until such time as the dye has worked its way out of the body or the fish's immune system has eliminated it. Of the few of these fish that survive this process, most will die within the two months following the trauma, and those that still survive will have lost their coloration within six to ten months. Only about 10% of the fish that survive for sale will keep their coloration for any length of time.
The carcinogenic pigments used on the colored tetra and colored botia are stored in vacuoles in cells creating a faint background color. The more intensely colored areas are created by injecting the fish with more of the dye in strategic locations. The fish's immune system then proceeds to fight this infection until the dye has been removed from the system. This added stress makes these fish highly susceptible to any other infection which they may be exposed to, since they are unable to defend themselves from it.
In all of these situations, the coloration of the animal eventually fades, but only those specimens hardy enough to survive significantly after the fact. Unfortunately, laws preventing cruel treatment of animals only apply directly to mammals, though some can be extrapolated as far as birds or occasionally reptiles (though reptile protection is as close as you can get to unheard-of), and never apply to amphibians or fish.
I have been told that in comparison to the size of the fish the needles used are the equivalent of injecting a human with a needle the size of a pencil! Now that I have been told about it I will NEVER (knowingly) buy a painted fish and will do my best not to patronise shops or sites which stock them.
Cheers, Eddie