Dithering refers to a shading style that uses as few colors on the image's palette as possible. It refers to the spriting technique of "blending" pixels to create different shades of colors without using several colors on a single palette. It is used commonly in sprites for Game Boy Advance and Super NES games as well as some Nintendo DS games.
Dithering is commonly employed as a simple 1 x 1 checkerboard pattern, as this allows the finest control over shading, but it is not uncommon to see other types of patterns used; squares, circles, and lines may be used for stylistic purposes, in addition to defining volume. Dithering is more appropriate for larger sprites or pixel art, because it is not able to define detail smaller than the pattern size.