On a monochrome display, areas of grey are created by varying the proportion of black and white pixels. In color displays, colors and textures are created by varying the proportions of existing colors. The different colours can either be distributed randomly or regularly. The higher the resolution of the display, the smoother the dithered colour will appear to the eye.
Dithering is used to create patterns for use as backgrounds, fills and shading, as well as for creating halftones for printing. It is also used in anti-aliasing in order to make jagged lines appear smoother on screen.
This article was originally based on material from FOLDOC, used with permission. Update as needed.