[xsmasher]

I don't think that's good advice. Posterize just throws away data and causes banding; and if your image contains mostly one hue, or a limited number of hues, then you're removing more colors than you need to.

Use a tool that will create a perceptual or selective palette like Photoshop's "save for web" tool. You can choose png-8 with 64 colors, but it will pick the right 64 colors for the job.

[ryanpetrich]

Since most users use 6bit dithered LCD displays, the quality loss usually isn't noticeable--for images that have more than 256 colors, it can be a big win.

edit: also those that require alpha transparency; adding alpha values uses up a lot of palette entries, and most tools don't support it (Fireworks?)