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What is "8-bit"?

Loads of games, from Super Mega Worm to Bitcoin Billionaire and from 8-bit Waterslide to 8-bit Doves, use it as a name or as a marketing term.

But what does it even mean?

Let's take a look and figure out what the term means, what 8-bit colour depth is, how 8-bit consoles powered their graphics, and what developers are actually talking about when they use this bit of retro jargon.