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I know its an old technique but can someone tell me in which areas the image dithering technique is used and why?

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closed as too broad by lennon310, ThP, jojek, Matt L., MBaz Jun 11 '15 at 14:23

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In image compression, when the number of bits per pixel are reduced, you might see an artifact called contouring. Dithering is used to reduce this artifact.

For more information, please see

http://en.wikipedia.org/wiki/Dither

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