The answer's right on that web page:
When you upload a PNG (Portable Network Graphics) file, similar
colours in your image are combined. This technique is called
“quantisation”. Because the number of colours is reduced, 24-bit PNG
files can be converted to much smaller 8-bit indexed colour images.
All unnecessary metadata is stripped too. The result: tiny 8-bit PNG
files with 100% support for transparency. Have your cake and eat it
too!
It turns 24-bit RGB files into palettized 8-bit ones. You lose some color depth, but for small images it's often imperceptible.
You can do the same thing manually on the command line with this awesome tool:
http://pngquant.org/
