This started as a test for the Amiga 500, trying to work out a crossfade palette (more or less successful).
The picture mode is MedRes, originally 640x256px, pixel-size 1:2.
Number of colors depend on the available memory (eg 512kb 8 colors max, 1mb up to 16 colors). Only further limitation is 5bit-color-depth.
workstages as animated gif: