Color Depth

Color depth is a maximum number of colors which an icon can contain. Color depth depends on how much data bits are reserved for storing color information of every pixel:

4 bit: 16 colors maximum (24 = 16);
8 bit: 256 colors maximum (28 = 256);
24 bit: Millions of colors or TrueColor (224 = 16,777,216).

Thus 4 bit color is 16-color; 8 bit color is 256-color, and 24 bit color is TrueColor.

TrueColor is as much possible color shades as human eye is able to distinguish. IconEdit2 allows you to create icons in TrueColor.

32 bit icons are storing 24 bit color, plus 8 bit transparency mask, allowing 256 grades of transparency.