Comparing texture compression in build settings and texture overrides

Questions & Answers
1

In build settings, (specifically Android) you can set texture compression to “ETC1 and RGBA16”, I do this and my textures look OK. But if I ever try to specifically override the texture in the inspector, say from RGBA32 to RGBA16. I will get some unsightly color banding. I have an image to show.

http://www.fileden.com/files/2007/1/8/613117/banding.jpg

Color banding is present only if you specify specific texture overrides. I’m mostly wondering, why is this effect only present for individual overrides and not from the one in the Build settings?
How can I know that Build settings is compressing RGBA32 textures to RBGA16 if no banding is present afterwords?

Edit:
I also don’t understand how my RGBA32 PNG’s can look great, even though the screen resolution is set to 16 bit.

2

I imagine it is because when you set the texture format to RGBA16, it’s converting to RGB565, RGBA5551 or RGB4444, and it’s not dithering when it does so. When the device renders a 32bit image to a 16bit screen, it’ll be dithering the image. I’m not sure if it’s possible to turn on dithering in the 32bit → 16bit conversion in Unity.