Retained Mode supports two color models: an RGB model and a monochromatic (or ramp) model. To retrieve the color model, an application can use the IDirect3DRMDevice::GetColorModel method.
The RGB model treats color as a combination of red, green, and blue light, and it supports multiple light sources that can be colored. There is no limit to the number of colors in the scene. You can use this model with 8-, 16-, 24-, and 32-bit displays. If the display depth is less than 24 bits, the limited color resolution can produce banding artifacts; you can avoid these artifacts by using optional dithering.
The monochromatic model also supports multiple light sources, but their color content is ignored. Each source is set to a gray intensity. RGB colors at a vertex are interpreted as brightness levels, which (in Gouraud shading) are interpolated across a face between vertices with different brightnesses. The number of differently colored objects in the scene is limited; after all the system's free palette entries are used up, the system's internal palette manager finds colors that already exist in the palette and that most closely match the intended colors. Like the RGB model, you can use this model with 8-, 16-, 24-, and 32-bit displays. (The monochromatic model supports only 8-bit textures, however.) The advantage of the monochromatic model over the RGB model is simply performance.
It is not possible to change the color model of a Direct3D device. Your application should use the IDirect3D::EnumDevices or IDirect3D::FindDevice method to identify a driver that supports the required color model, then specify this driver in one of the device-creation methods.
Palettes are supported for textures, off-screen surfaces, and overlay surfaces, none of which is required to have the same palette as the primary surface. If a device supports a 4-bit indexed palette (16 colors) and you have 8-bit indexed art (256 colors), Retained Mode will render the art as 4-bit by taking the first 16 entries from your palette and remapping to those. Therefore, you should put your 16 preferred colors at the front of the palette if possible.