Bit depth refers to the number of variations of a single colour (Red/Green/Blue) which can exist in your image. I don't want to get too technical in this article as you'll find plenty of information online about it. Instead, I want to show you the benefits of working in 16bit.
If you have a little understanding of bit depth you might think that, since a jpg file is only 8 bit, there's no benefit to working in 16 bit if you're saving your image as a jpg. This would be an incorrect assumption!
Let's first outline 2 facts:
8 Bit colour has 256 shades of Red, Green and Blue for a total of 16,777,216 colours (256x256x256)
16 bit colour has a whopping 65,536 per channel! That means a total of… a lot. (~280 trillion colours).
If you're interested in understanding more about the above, check out the Wikipedia page on colour depth.
But... 16,777,216 Colours is a lot!
Yes, while that is true, the problem is that often in our art, we are only using a small sub-set of colours and often with a gradient, this is where you will notice the limitations the most.
As you can see in the image below, the gradient in the sky becomes heavily degraded when we use 8bit.

So how do we fix this?
Ideally, we could work with 16bit source files all the time. However, JPG files don't support 16bit and most 16bit formats are big. However, you can gain most of the benefits of working in 16bit simply by converting your Photoshop documents to 16bit at the very beginning of your work!
Simply head to Image -> Mode -> 16bit, to convert your Photoshop document to a 16 bit file.

By doing this this at the start of your work, any edits you make to images in this document will have the benefit of 16bit colour. It doesn't replace the benefits of using a 16bit source file, but it's a good step!
Beware of RAW files!
For some unknown reason, Adobe don't import RAW files as 16bit documents by default! From a professional standpoint this is nuts, but luckily we can change the setting easily and it will remain set correctly!

To do this, open a RAW file by dragging it into Photoshop or go to File->Open. The Camera Raw dialog window will appear. You want to click the white underlined text at the bottom.
This will then open another settings dialog where you'll see the "Depth" setting and can change it to 16 bits/Channel.

Thankfully, once we have made this change the setting will stay this way... at least until we reinstall Photoshop!
Bit Depth "Popping"
Sometimes while you work on a 16bit file in Photoshop, you'll notice a weird visual artefact as you zoom in and out. Check it out in this example:
As the Canvas zooms in, you'll notice a "pop" where the image quality and banding seems to improve. Rest assured, when this happens it is simply the limitations of the software and/or your monitor in its ability to display the full colour range. If you are saving your file as a 16bit image then this visual banding won't affect you.
If you are saving your file as a JPG, for instance, to share online, you'll may want to address this issue as the final output could potentially have some banding in it. To fix it you need to bring some more range into your image either by changing the colour grading or replacing the sky with a better reference.
Want an in-depth video explanation?
If you're looking for a more detailed explanation or some guidance on how to approach 16bit workflow in a professional capacity, check out the "Working in 16bit" tutorial below!
