Why Use a Texture Color Table?

Here are two example situations in which the texture color table extension is useful:

Volume rendering. You can store something other than color in the texture (for example, a physical attribute like bone density) and use the table to map that density to an RGB color. This is useful if you want to display just that physical attribute (for example, bone density) and also if you want to distinguish between that attribute and another (for example, muscle density). You can selectively replace the table to display different features. Note that updating the table can be faster than updating the texture. (This technique also called "false color imaging" or "segmentation").
Representing shades (gamut compression). If you need to display a high color-resolution image using a texture with low color-component resolution, the result is often unsatisfactory. A 16-bit texel doesn't offer a lot of shades for each color, because each color component has to be evenly spaced between black and the strongest shade of the color. If an image contains several shades of light blue but no dark blue, for example, the on-screen image can't represent that easily because only a limited number of shades of blue, many of them dark, are available. When using a color table, you can "stretch" the colors.