Typically a graphical style where there are one two colors. (A bit can be either on or off, so two options) Commonly black and white, but can be any combination depending on the style the creator is trying to accomplish.
16 pixels by 16 pixels is a common resolution for assets matching a low-res pixel art aesthetic. Although the assets may not be specifically 16x16, they are designed to work in a graphical setting where objects are around that size.
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