Indexed Color mode produces 8‑bit image files with up to 256 colors. When converting to indexed color, Photoshop builds a color lookup table (CLUT), which stores and indexes the colors in the image. If a color in the original image does not appear in the table, the program chooses the closest one or uses dithering to simulate the color using available colors.

Although its palette of colors is limited, indexed color can reduce file size yet maintain the visual quality needed for multimedia presentations, web pages, and the like. Limited editing is available in this mode. For extensive editing, you should convert temporarily to RGB mode. Indexed color files can be saved in Photoshop, BMP, DICOM, GIF, Photoshop EPS, Large Document Format (PSB), PCX, Photoshop PDF, Photoshop Raw, Photoshop 2.0, PICT, PNG, Targa, or TIFF formats.