The idea of reducing resolution of “game screen” and limiting it to 256 colors is really cool. It allows to use low-res textures, sprites instead of models, simple cubes for level design, and everything looks good.
This approach can be used outside of demoscene. Usually indie game developers avoid 3d altogether because of amount of work to make decent models and textures. With this approach laboriousness of asset making becomes almost at the same level of 2d pixel art.
(I died a lot, though :/)