A color lookup table, also known as a "CLUT" or color palette, is a method of converting the logical color numbers stored in each pixel of video memory into physical colors, normally represented as triplets of RGB values that can be displayed on a monitor. The palette is simply a table of indexed color values stored in memory which is addressed by the logical color and whose output is split into the red, green and blue levels which drive the actual display.
The number of entries (logical colors) in the palette is the total number of colors which can appear on screen simultaneously. The width of each entry determines the number of colors which the palette can be set to produce. A common example would be a palette of 256 colors (i.e. addressed by 8-bit pixel values) where each color can be chosen from a total of 16.7 million colors (i.e. 8-bits for each red, green and blue value) to improve the perceived color of the display. Changes to the palette affect the entire screen at once and can be used to produce special effects more quickly than by individually updating the pixels.
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