BitDepth
Bit depth is used to denote how many colors a game or application needs to function properly, which is the number of colors plus other channels like alpha.
The more colors, the smoother the image. 1-bit is two colors-- black and white. 2-bit is four colors, 4-bit is sixteen, 8-bit is 256 colors, etc.
The number of colors at any bit depth = 2 to the power of the bitdepth. For instance, 8-bit = 2 to the 8th power = 2x2x2x2x2x2x2x2 = 256 colors.
If game uses alpha or heightmaps, then they are additional channels that can be added to the bitdepth number.
16-bit is 65536 colors without any additional channels, but if you want to add an alpha channel, then 16 would be divided into RGB and alpha, which can be done a number of ways. For example, if you use 4 bits each for Red, Green, and Blue, then that leaves 4 bits for the alpha, so you have 16 colors for alpha. Or else 5 bits for each RGB means you have 1-bit for alpha, which is only 2 colors, but gives you more RGB colors to work with. It's a trade-off.
