Dithering
Also said as Ordered dither, Bayer dither, Error diffusion, Floyd-Steinberg
Faking colours you do not have by mixing dots of the ones you do. From a distance, a checkerboard of black and white looks grey, so a smooth gradient survives a tiny palette.
Without it, a gradient breaks into hard stripes called banding. It also suits a style, though it can flicker badly once things move.
Say it
“Quantise the fog to 8 levels and use a 4 by 4 Bayer dither, fixed to the screen. If it crawls during camera moves, try blue noise.”
Where you’ve seen it
Return of the Obra Dinn renders in pure black and white. Lucas Pope began with a Bayer pattern, moved to his own blue-noise variant, and worked to stop the pattern flickering as the camera moves.
Not to be confused with banding
Banding is the problem: visible steps where a gradient ran out of colours. Dithering is the fix, trading those steps for fine grain.