This feature is primarily intended for those using custom textures, and custom models. It allows you to include a customized master palette for you track, which MTM uses to display all your textures. In earlier versions of Traxx, you could only selects from the palettes used by the stock tracks, which may not include good color matches for your custom textures.
This is a 2-stage process - first, obtain the palette you want, then - when you click OK - all your textures will be "remapped" to display with the new palette.
When you click the "Create Optimized Palette" button (first button in the box), Traxx will look at all the textures that your track uses (terrain and model textures) and figure out the best set of colors to use. The number of times that a texture is used is taken into consideration; a texture that is used only a couple of times will not be given as high priority as one that is used many times. The same applies to models - textures used by models that are used many times (eg trees) are given higher priority than less numerous objects (eg checkpoints).
This process uses a very clever algorithm (its not as easy as you might think!), but its still possible that some colors may not get a great match. Generally speaking, however, it will give much better results than using the stock palettes (unless your custom textures are derived from stock ones, and use the same colors).
The custom palette always includes a small set of "standard" colors, which the game uses to display the map, checkpoint finder, etc.
Specific colors cannot be manually edited directly in here, but you can also save and load palettes from palette files (ACT or MS PAL format).
tip: You can use this feature to convert ACT files into PAL files (and vice versa)! Load one up of one type, then just save it as the other type.
When you click OK, Traxx will re-load all the textures that your track uses. The display will then be done using the new palette, so you will be able to see how well it worked right away.
Note that the race-start splash screen image (Wilderness truck in MTM2)
is drawn with the track's palette, so it may look different than before,
depending on what colors are available. (Traxx Help).