Use Dithering to Smooth Edges in GIF and PNG-8 Files

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Dithering is a process in which a color is simulated because it is outside of the currently available color palette. This process causes colors to have a somewhat "spotty" or "speckled" appearance because it often requires two or more similar colors, placed next to each other in a checkerboard-style pattern, to approximate a color.

You can use a type of controlled dithering when optimizing web graphics within Photoshop to specify how to handle colors not found within the active color palette. For example, if you have an image with 256 colors in its palette and you then reduce that color palette to 32 colors, you can specify the type of dithering Photoshop should use when remapping the 224 colors no longer in the color palette.

While dithering can be a good thing, because it may smooth some gradations that might otherwise look rough or blocky, it increases the number of colors used and therefore also increases the final file size of a graphic. If that means users must wait longer to view the file, this is a good reason to avoid dithering.

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