PNG was designed to replace GIF for online purposes and the inconsistently implemented TIFF format for image storage and printing. As a result, there are three types of PNG files: indexed color (palette images), grayscale, and truecolor.
8-Bit Palette Images
Like GIFs, PNGs can be saved as 8-bit indexed color. This means they can contain up to 256 colors, the maximum number that 8 bits of information can define. Indexed color means the set of colors in the image, its palette, are stored in a color table. Each pixel in the image contains a reference (or "index") to its corresponding color and position in the color table.
Although 8-bit is the maximum, PNGs may be saved at lower bit-depths (1-, 2-, and 4- bit, specifically) as well, thus reducing the maximum number of colors in the image (and the file size).
Indexed color PNGs are also capable of containing multiple transparency levels within the index color palette itself (performing a task usually assigned to an Alpha Channel).
PNGs can also support 16-bit grayscale images -- that's as many as 65,536 shades of gray (216), enabling black and white photographs and illustrations to be stored with enormous subtlety of detail. This is useful for medical imaging and other types of imaging where detail must be maintained, but it is not much of an advantage for images intended for web delivery due to the inherent limitations of low-resolution images. Grayscale images are supported at 1-, 2-, 4-, and 8-bit depths as well.
PNG can support 24-bit and 48-bit truecolor images. "Truecolor" (or the "true color space") refers to the full color range (millions of colors) that can be defined by combinations of red, green, and blue (RGB) light on a computer monitor. Truecolor images do not use color tables and are limited only by the number of bits available to describe values for each color channel. In PNG format, each channel can be defined by 8-bit or 16-bit information. It should be noted that 48-bit images are useless for the Web. Even 24-bit should be used with care (other formats offer smaller file sizes with acceptable image quality).
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