When talking about graphics that's correct, but I think in this kind of context the "8-bit" refers more to (nostalgic, rose-tinted memories of) the visual style

When talking about graphics that's correct, but I think in this kind of context the "8-bit" refers more to (nostalgic, rose-tinted memories of) the visual style of so-called 8-bit consoles, in particular the NES/Famicom, and most consoles that we consider 8-bit didn't allow for anywhere near 256 colours on-screen. Here the 8-bit qualifier refers to the 6502 CPU's word size; the NES in-particular only had a total palette size of 54 colours [1], and additional colour limitations meant that in practice you'd rarely see more than around ~25 at a time. Or take the Sega Genesis/Mega Drive, a 16-bit console; its colour capabilities didn't give anything close to 2^16 = 65536 on-screen colours. Instead you got a 9-bit palette with only around 64 on-screen colours [2]. [1] https://en.wikipedia.org/wiki/List_of_video_game_console_palettes#Famicom.2FNES https://en.wikipedia.org/wiki/List_of_video_game_console_pal... [2] https://en.wikipedia.org/wiki/List_of_video_game_console_palettes#Mega_Drive.2FGenesis https://en.wikipedia.org/wiki/List_of_video_game_console_pal...