Palettes
GIF is palette-based: the colors used in an image (a frame) in the file have their RGB values defined in a palette table that can hold up to 256 entries, and the data for the image refer to the colors by their indexes (0–255) in the palette table. The color definitions in the palette can be drawn from a color space of millions of shades (224 shades, 8 bits for each primary), but the maximum number of colors a frame can use is 256. This limitation seemed reasonable when GIF was developed because few people could afford the hardware to display more colors simultaneously. Simple graphics, line drawings, cartoons, and grey-scale photographs typically need fewer than 256 colors.
As a further refinement, each frame can designate one index as a "transparent background color": any pixel assigned this index takes on the color of the pixel in the same position from the background, which may have been determined by a previous frame of animation.
Many techniques, collectively called dithering, have been developed to approximate a wider range of colors with a small color palette by using pixels of two or more colors to approximate in-between colors. These techniques sacrifice spatial resolution to approximate deeper color resolution. While not part of the GIF specification, dithering can of course be used in images subsequently encoded as GIF images. This is often not an ideal solution for GIF images, both because the loss of spatial resolution typically makes an image look fuzzy on the screen, and because the dithering patterns often interfere with the compressibility of the image data, working against GIF's main purpose.
In the early days of graphical web browsers, graphics cards with 8-bit buffers (allowing only 256 colors) were common and it was fairly common to make GIF images using the websafe palette. This ensured predictable display, but severely limited the choice of colors. Now that 32-bit graphics cards, which support 24-bit color, are the norm, palettes can be populated with the optimum colors for individual images.
A small color table may suffice for small images, and keeping the color table small allows the file to be downloaded faster. Both the 87a and 89a specifications allow color tables of 2n colors for any n from 1 through 8. Most graphics applications will read and display GIF images with any of these table sizes; but some do not support all sizes when creating images. Tables of 2, 16, and 256 colors are widely supported.
Read more about this topic: Graphics Interchange Format