Let's consider a wobulated 1080P DLP with a color wheel that uses the three primary colors. (Modified color wheel approaches don't really change much for this analysis.)
The mirrors can move 15,000 times per second. Each mirror is assigned two pixels, so that's 7,500 times per pixel, or 2,500 per primary color. In a 1/60 frame, that's ~42 movements per frame. We also need to subtract a little for the period where the color wheel is between colors.
This leaves us with about 5 linear bits of information per channel, which is substantially less than the 10 linear bits (8 non-linear) for what most people would consider full color.
So, what's going on? Is there some other magic involved or do DLP sets have very limited bit depth?
I hooked up my laptop to my DLP set (Samsung HL-S6188w) and did some experiments with the brightness and contrast. I found that in dark grays, there is some green speckle noise. Perhaps this is some attempt by Samsung make up for the missing bit depth with some dithering?