The idea is to lessen the amount of colours in a GIF image to the minimum number necessary and to therefore remove stray colors that are not required to represent the image. GIFs are able to hold multiple bitmaps of up to 256 colors each, using LZW (Lempel Zev Welch - a simple form of file compression that removes inefficiencies in the data storage without losing data or distorting the image) compressed raster data to minimize file sizes. The GIF file format was invented by Compuserve for their online service, but they made the specifications publicly available. It uses the lossless data compression technique which reduces the file size without any impact on the quality. It also supports animations and whenever you see a logo or other sharp edged line art then you are probably dealing with the GIF format.
This file format supports up to 8 bits per pixel therefore giving an image the ability to contain 256 distinct colours chosen from the 24-bit RGB colour space. The GIF file format is a type of bitmap image and has become popular due to the growth of the internet.