color palettes

I am trying very hard to understand color palettes I watched the digital brilliance hour tut...am I understanding this right that in RGB red is set to to 255 blue set to 255 and green set to 0? I added a character png file but do I need to have my files in pcx format in order to do this process I am using fighter factory but after I set the palette that is the only format it will allow me to save it in. And can I change the bit rate with this program? is it 24 bit that can be used?
 
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