As requested here are some sample pics.
The first is to show the 256 option (using opaque colours).
The picture contains 3 sets of color bands (grey, red, green, blue) each varying in intensity from 0 to 255.
The first set of bands is the original showing a smooth progression from black to the relevant colour.
The second set shows the standard Posterize effect applied to this image with Red & Blue set to 16 but Green set to 64 (max value). You can see bands in each strip (especcially at the darker end).
The third set shows the Posterize Alpha effect applied (to opaque colours) with value 16 for red & blue but 256 for Green. The green colour band now has no banding.
The second image is to show the transparancy option.
The picture contains 3 sets of solid blocks of colour (blue, green, red, white) each with varying alpha values (0 to 255).
The standard posterize adjustment has no effect on this image!
The first set of bands shows the original with smooth variance of the transparancy.
The second set of bands shows a posterize value of 4 applied to the alpha channel (so there are only four possible alpha values).
The third set of bands shows the transparent only value being applied. The threshold was set at 220. You can see the topmost block has a few colours that have been posterized to fully opaque but the rest (above the threshold) are unchanged
(This can't be viewed inline as it blanks out the tranparancy)