When custom colors are used in a conversion, the new movie file is stored with a color “palette” that shows the colors used in the movie.

When the movie is played, this custom palette is used in place of the standard Macintosh palette of colors. The custom palette contains a better choice of colors for the movie. 

You can set custom colors only if you are using System 7, but they will work even when the movie plays on a computer using System 6.