1. A method of avoiding perceptual artifacts in an image display, said method comprising the steps of: receiving a gamma corrected image signal, said gamma corrected image signal comprised of at least one luminance component and at least one chrominance component; dithering one or more of said at least one chrominance component to form a dithered image signal, said dithering step operable to reduce image contouring in said dithered image signal; converting said image signal to an RGB (red, green, blue) image signal; removing said gamma correction from said RGB image signal; and wherein said RGB image signal is comprised of three digital signal components, said method further comprising the step of reducing the number of data bits of said three signal components of said RGB image signal by dividing each of said digital signal components into a group of most significant bits and a group of least significant bits for each pixel of a pixelated image, wherein said most significant bits are transmitted to a spatial light modulator and said least significant bits are diffused to other pixels in said pixelated image.