In the product information overview it says "choose from over 16 million colors to set the mood". Is this actually the case?

People often through about the "16 million" figure, even in marketing literature. However this comes from number of distinct addressable colours in RGB with 8 bits a primary colour.

2^(3*8) = 2^24 = 16,777,216

Philips Hue technology does not use RGB rather a subspace of CIE. There are many colours in RGB space which cannot be produced by Philips Hue bulbs. There are also some colours which can be represented which do not map well to RGB. I'm sure there are a lot of colours, but how many?

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    The LightStrips use the hue/saturation color mode for producing their colors. To change colors the app sends commands to the SmartBridge. You can send 65,536 hue values and 256 saturation values: 65,536*256 = 16,777,216.

    In reality, it is very hard to distinguish hue or saturation values when they are very close. You can also dim the bulbs in 256 distinct levels. The current SmartBridge maps any 255 values to 254, so saturation and brightness really support 255 levels. Again it is hard to see any difference for values that are very close.

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