It's using multiple neighbouring pixels with different colors to create a new color that isn't available to a single pixel. So it's cheating, yes. Quality varies though, depending on the actual implementation. Sometimes it's visible, sometimes not. Manufacturers often claim 10-bit colors when in reality it's 8-bit with dithering. For color critical applications such a photo/video work, the choice should be obvious. For Excel/Word, it doesn't really matter.To my (limited) knowledge dithering simulates more colors but doesn't actually produce them.