I think this may be a case of you're right but I'm not wrong.
This seems to be a peculiarity of Adobe's PDF format. From Wikipedia:
"... indexed color is a technique to manage digital images' colors in a limited fashion, in order to save computer's memory and file storage (snip) the color information is not directly carried by the image pixel data, but it is stored into a separate piece of data called a palette: an array of color elements, in which every element, a color, is indexed by its position within the array. This way, each pixel does not contain the full information to represent its color, but only its index into the palette. (snip) The palette in itself stores a very limited number of distinct colors, up to 4, 16 or 256 are the most common cases. (snip)
For example, the PDF file format does support indexed color in other colorspaces, notably CMYK, and Adobe Distiller by default will convert images to indexed color whenever the total number of colors in an image is less or equal than 256."
In PShop,, indexed color mode is a single channel image - not associated with RGB or CMYK (other than perhaps through and imbedded profile?) (Which s what I originally wrote)
In PShop if I convert an RGB (or CMYK) image that contains more than 256 colors into indexed color mode then I see artifacts.
In PShop if I convert an RGB (or CMYK) image that contains less than 256 colors into indexed color mode then I don't see artifacts.
So Adobe Distiller does the conversion to indexed color (automatically?) if the image contains less than 256 colors while maintaining its CMYK or RGB association. Because the image uses a range of colors that fall within the (practically) 256 limit of indexed color mode, you can compress the image without introducing artifacts. Correct?
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