Check here http://www.codeproject.com/Articles/35886/WPF-ItemsControl-with-alternating-items-and-hover-.aspx
You have to change your code like this to get it working
<ItemsControl ItemsSource="{Binding DataList}" AlternationCount="2">
<ItemsControl.ItemTemplate>
<DataTemplate>
<Grid x:Name="FooBar" Margin="0,0,0,10">
----------------------------
----------------------------
</Grid>
<DataTemplate.Triggers>
<Trigger Property="ItemsControl.AlternationIndex" Value="0">
<Setter Property="Background" Value="Blue" TargetName="FooBar"/>
</Trigger>
<Trigger Property="ItemsControl.AlternationIndex" Value="1">
<Setter Property="Background" Value="Red" TargetName="FooBar"/>
</Trigger>
</DataTemplate.Triggers>
</DataTemplate>
</ItemsControl.ItemTemplate>