The combination of the display modes supported by your graphics adapter and the color capability of your monitor determine how many colors it displays. For example, a display that operates in SuperVGA (SVGA) mode can display up to 16,777,216 (usually rounded to 16.8 million) colors because it can process a 24-bit-long description of a pixel. The number of bits used to describe a pixel is known as its bit depth.
With a 24-bit bit depth, eight bits are dedicated to each of the three additive primary colors -- red, green and blue. This bit depth is also called true color because it can produce the 10,000,000 colors discernible to the human eye, while a 16-bit display is only capable of producing 65,536 colors. Displays jumped from 16-bit color to 24-bit color because working in eight-bit increments makes things a whole lot easier for developers and programmers.
Simply put, color bit depth refers to the number of bits used to describe the color of a single pixel. The bit depth determines the number of colors that can be displayed at one time. Here you can see the number of colors different bit depths can produce:
Colors: 2 (monochrome)
Colors: 4 (CGA)
Colors: 16 (EGA)
Colors: 256 (VGA)
Colors: 65,536 (High Color, XGA)
Colors: 16,777,216 (True Color, SVGA)
Colors: 16,777,216 (True Color + Alpha Channel)
Notice that the last entry is for 32 bits. This is a special graphics mode used by digital video, animation and video games to achieve certain effects. Essentially, 24 bits are used for color and the other eight bits are used as a separate layer for representing levels of translucency in an object or image. Nearly every monitor sold today can handle 24-bit color using a standard VGA connector.
To create a single colored pixel, an LCD display uses three subpixels with red, green and blue filters. Through the careful control and variation of the voltage applied, the intensity of each subpixel can range over 256 shades. Combining the subpixels produces a possible palette of 16.8 million colors (256 shades of red x 256 shades of green x 256 shades of blue).
Now that you have a general idea of the technology behind computer monitors, let's take a closer look at LCD monitors, CRT monitors, and the general buying considerations for both.