Note though, that this extra restriction isn't a technical limitation of the NES, rather, it's a choice by the developers of Legend of Zelda for the purpose of shrinking the amount of bytes needed for each "screen" of the world.

By doing this, you only needed to store 2 palettes per "screen", rather than 16 tiles x 11 tiles = 176 palettes per "screen".

A clever hack! It exploits the tendency of each screen to have impassable obstacles (rocks, trees, walls) around the 4 edges of the screen, with optional openings. By using a separate palette for the middle area, the screen as a whole looks more colorful.

This is so fascinating. Thank you for this knowledge bomb.

Any chance you are aware of any other hacks from old school video games?

Did you ever notice that every item, human, and non-boss enemy in Zelda is made of one of exactly four palettes, each of which is made of only three colors (plus transparent)?

    1. Link's tunic color, his skin tone, and his hair color
    2. White, orange, red
    3. White, light blue, dark blue
    4. Black, dark teal, and red

For example, #1 is used for Link, Zelda, the merchants, and the raft, which is why when you get the blue ring or the red ring and your tunic color changes, it also changes the color of the other people's clothes and the binding on the raft.

Here's a graphic I made of every sprite in the ROM six times -- one with the three versions of palette #1 (no ring, blue ring, red ring) and one for each of the three other palettes: http://i.imgur.com/omBWovb.png

It allows you to see that, e.g., Wizzrobes are made of only three colors, and they're the exact same three colors as the red candle, heart containers, tektites, like-likes, octoroks, rupees, the boomerang, the map, fire, the life potion, fairies, and the master sword.

It seems this limitation/concept is something that I haven't seen too much in modern pixel-art. We often see modern pixel art using larger pallets, but just low resolutions.

This is the problem I have with the widespread use of pixel art. Most of it is ignorant of why the old graphics looked the way they did. Like you said it is adopting one of the limitations but ignoring the others.

The developers of Shovel Knight actually emulated the way NES graphics work (and added some enhancements to it) and the result is a much more convincing retro feel.

IMO this is also due to modern pixel-art actually emulating 16 bit pixel art.

The 16 bit computers already had graphics capabilities much more similar to modern graphics cards than their predecessors.

>the edge of the lake has brown sparkles, and the inner lake has green ones

Thank you for answering a question I've had for 26 years or so now

Hahaha...I had always chalked that up to my old CRT TV and the hardware of the time.