Typically an image can hold a specific range of colors which is referred to as the depth of the image. By default the number of colors an image can hold is millions which gives essentially photo-realistic images and corresponds to a depth of 32.
The number of colors of an image can be reduced. You can change it to thousands or 256 or 16 or 2. These correspond respectively to a depth of 16, 8, 4 or 1. If you do this you will generally lose quality but it will reduce the amount of memory used and can speed up operations.
However you should avoid reducing the depth of images. Some operations do not work properly unless the depth is 32 and others may not work quite as you expect due to the color compromises that have to be made.