GLOSSARY
When converting images with a palette of a greater number of colors to an image with a palette of fewer colors, dithering is a means of simulating colors not in the more limited palette by mixing different colored pixels together.
Dithering is also a method of smoothing the edges between two color regions by mixing their pixels so the edges appear to blend together.
In 3DS MAX, you have the option of setting dithering if you are rendering for the limited colors of an 8-bit display (256 colors). It can help prevent a banding effect in color gradients. Dithering does increase the size of 8-bit files and slows down the playback speed of animations. You may want to try applying maps to the flat areas in the scene to see if that eliminates banding before turning on dithering.
3DS MAX is designed to render 64-bit color output. Consequently, you also have the option of setting dithering for true color (24 or 32-bit color). The Dither True Color option ensures that you get the best quality on true-color displays.
You turn dithering on and off in the Rendering page of the Preferences dialog. You can also set dithering for scene motion blur in Video Post. Here, dithering provides a smoothing effect between the separate images making up the "blur." Video Post dither is set as a percentage of total dither.