preset palette, individual resolution per char (8x8 for hires, 4x8 for multicolor)
fix background color (black this time), 2 additional fix colors for multicolor chars (light red, orange) plus one individual color for each char from the first 8 out of the c64 palette
This picture is shown in the demo Coma Light 13, used for somekind of dynamic comic screen. The mode is rarely used nowadays for graphics, though it is quite common for backgrounds in computer games.
From a technical point of view charmode is like using a font which shows graphic elemtens instead of a-b-c. 256 chars are stored to one charset which again is limited to one per rasterline (you still need a coder, if you want to display more than one charset on screen). This picture for example is subdivided to 12 charsets.
Hey, just saw the demo on YouTube...good stuff! :)