We have added an update about the brouhaha regarding the Nexus One browser not showing the banding: Here is the excerpt:

Color Depth and Granularity Update: People using the browser on the Nexus One report that they don't see the banding shown in Figure 1 for the NASA Photo “Sunset on Mars” from within the browser, but Gizmodo shows screen shots of Intensity Scale Ramps using the Nexus One Browser that duplicates and confirms the 16-bit color depth and banding shown in Figure 1. This definitively establishes that the Nexus One has a 16-bit display interface. It sounds like the Nexus One browser is using its own internal scaling together with a dithering algorithm that seems to be able to smooth over false contouring in some cases. But it’s clear that the Nexus One display system is using only 16-bit color and that is absolutely shocking!

It remains to be seen whether the 16-bit color is a hardware limitation or a software configuration that can be upgraded and fixed. My guess is that it looks like a hardware limitation because it is possible to see image flicker in dark test patterns, which means that the display is using low frequency Pulse Width Modulation. High frequency PWM is needed to produce the 256 levels needed for 24-bit color.