It is explained in the first post, but not in depth. This offers 2 bits, so 4 colours (or states as you wish). You have to decide what colours you choose, you could as well drop red or green to get an other set of colours. One of these states is 00, no colour, so black. You could also choose to have blue HIGH all the time, to get another extra palette. 00 would be blue. 01 would be purple. 10 would be cyan. And 11 would be white.
The reason is storage; to get a reasonable resolution, just drop a third of the memory needed. I can imagine it also saves some timing trouble, and it would help against the reported misalignment (chance of that would grow larger each added bit per pixel).