Bit depth is the number of distinct brightness levels a format can store per color channel: standard 8-bit video has 2^8 = 256 levels, 10-bit has 1024 (four times as many), and 12-bit has 4096. A level is the smallest brightness step the format can represent, and the smallest the eye might catch on a flat field. When a gradient spans only a few levels, the picture has no choice but to draw it as a few flat bands - which is why too low a bit depth is one of the two root causes of banding, the other being quantization. The arithmetic points at the fix: a sky ramping across 20 levels over 400 pixels gives 20-pixel bands at 8-bit, but the same range spans about 80 levels at 10-bit, shrinking the bands to roughly 5 pixels, below the eye's threshold. Counterintuitively, encoding ordinary 8-bit SDR in 10-bit helps too, because the codec's internal math runs at higher precision, so the rounding that creates contours happens on a finer grid.
