The system of the bacterium Escherichia coli and its virus, bacteriophage lambda, is paradigmatic for gene regulation in cell-fate development, yet insight about its mechanisms and complexities are limited due to insufficient resolution of study. Here we develop a 4-colour fluorescence reporter system at the single-virus level, combined with computational models to unravel both the interactions between phages and how individual phages determine cellular fates. We find that phages cooperate during lysogenization, compete among each other during lysis, and that confusion between the two pathways occasionally occurs. Additionally, we observe that phage DNAs have fluctuating cellular arrival times and vie for resources to replicate, enabling the interplay during different developmental paths, where each phage genome may make an individual decision. These varied strategies could separate the selection for replication-optimizing beneficial mutations during lysis from sequence diversification during lysogeny, allowing rapid adaptation of phage populations for various environments.