Dithering is a technique which allows an image to approximate a wider range of colors using a limited palette (just like in GIF files), by employing alternating patterns of pixels with different colors which get "blended" in the eye to give the appearance of smoother color transitions. Dithering is more apparent when using less than 8 bits per pixel. Because of the way the compression algorithm used in the GIF file format works, dithering will increase the resulting file size.
Transparent GIF files are using one of the indices in the color palette to specify a transparent color. When the Transparent option is checked, Likno Web Button Maker will assume that your transparent color is the color of your background, and specifically the top-left pixel. If your background color is very close to the colors used in your button, some of the areas inside your button may become transparent too, therefore you should pick a background color which is totally different than the colors in your button.
Also bear in mind that because of the limited transparency support in the GIF format, semi-transparent areas around your button will display colors between the ones in your button and the background color (because antialiasing is performed between these colors).
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