Using this functions you can change count of used colors in image. Right after you run this function a dialog box will appear. You can select count of color in it together with type and parameters of filters.
For color decrease to 3-256 colors you can use Floyd-Steinberg dithering (image usualy looks better). You can also change following two items: 'color compare' and 'select colors as'. By setting them to different values you can lightly tweak final look of image. Recommended values are 'By lightness' for 1st item and 'pixels avarage' for 2nd item...
If you are decreasing color depth to 2, image will be converted to Black/White. You can use several filters to do it - Floyd-Steinberg and Hilbert are the best choice in my opinion (hilbert has a parameter - 1 is the best quality). However you may need some other type - try them yourself.

Hint: In case you want decrease color depth to small number of colors (for example 5), it's better to decrease color depth by steps, if you want good results (this means you have to decrease colors count first to 256, then to 16 and at least to 5 colors). I also recommend that you try different filters (for example, default filters 'by lightness' and 'pixels avarage' are good for photos. If you want to quantize some diagrams or screenshots, you can also try 'normal' and 'box center' filters - they gave me good results...)