There are 2 banks (one usable at a time) of 256 palettes available. Each palette has 16 entries, the first is the transparent index ("color 0"), the 15 others are real colors, made of 16bit RGB definitions. Palettes are located at $400000 in the 68k memory map, they're physically stored in the palette RAM.
The maximum number of colors on screen without RLI tricks is 256*16=4096 (out of 2^16=65536).
There are two special colors used:
- The first color of the palette bank ($400000) is the reference color for the video output. It has to be $8000 (black) otherwise monitors won't be happy and other colors won't be displayed correctly.
- The last color of the palette bank ($401FFE) is the backdrop color (the color of the backmost layer on the screen).
D R0 G0 B0 R4 R3 R2 R1 G4 G3 G2 G1 B4 B3 B2 B1
Each color component is coded in 6 bits, with 1 common "dark bit", effectively making full use of the 16 color definition bits.