When you convert an image to grayscale, the HTML Help Image editor will attempt to render the picture with as much contrast between bright and dark as the original image had using only white, black, and grays. If you convert a high color image to grayscale, it may have as many, or more, unique colors as the original color image.
Converting an image to grayscale doesn't necessarily change the color format. A grayscale image must be at least 256 colors to make sufficient variations of gray, so if you convert a 16-color image to grayscale, it will change to a 256-color image. If you convert a 256-color or 24-bit color image, it will retain its original color depth.