Let me rephrase.
A 256 shade gray image only shows as 16 shades on a 4 bit display. Dithering the image has the potential to effectively display 256 shades on that same 4 bit display. Effectively increasing the number of displayed shades to 256. Of course, good luck being able to distinguish 256 shades on an LCD, or just about any, display.
But your dithered example shows that dithering can help a great deal.
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