Posterization of an image occurs when a region of an image with a continuous gradation of tone is replaced with several regions of fewer tones, resulting in an abrupt change from one tone to another. This creates an effect somewhat similar to that of a simple graphic poster. ... Unwanted posterization, also known as banding, may occur when the Color Depth, sometimes called bit depth, is insufficient to accurately sample a continuous gradation of color tone. As a result, a continuous gradient appears as a series of discrete steps or bands of color — hence the name. (Wikipedia).
Left: 8 bit image with 256 levels of intensity. Right: the color depth was reduced to store only 6 levels of intensity, to generate noticeable posterization.