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MrTom : I completely agree with you that the main technical problem with this image is banding, not grain/noise. However, JPG compression artifacts don't look like banding. JPG compression artifacts produce block-like patterns, not the predominantly line and curve like bands like we see here.
Banding (posterization) is always caused by a problem in bit depth. FWIW, it produces, exactly as you said, a reduction in the number of distinct colors. In fact, sometimes it is so severe that spikes (ie, quantization of tonal values into distinct values not smooth continua) can be seen in the histograms of the channels.
Attached below is a 1:1 crop of the upper LH corner of the image and the R, G, and B histograms of that part of the image. (Note: to make this effect clear, I brought your image into PS as a 16 bpc ProFoto file, cropped the banded area, and then used a levels adjustment to expand the histograms).
Unfortunately, we don't know exactly how this image was captured and processed, so it's impossible to say what caused it. But, if you want to pretty much ensure that you reduce banding to an absolute minimum, you should do all of the following:
- Nail the camera settings (particularly, the exposure) so that you minimize the amount of brightness and contrast changes you must make later, in post processing.
- ALWAYS save and process your images as raw files, not JPGs. Since you will be processing RAWs, the color space you set in your camera doesn't matter.
- Export the raw converter output to PS at 16 bits per channel, not 8.
- If you have important colors in the deep shadows and highlights that you want to preserve, set your raw convert to export files in the ProPhoto color space, not Adobe RGB, and certainly not sRGB. The extended gamut of ProPhoto is most important in the very darkest and lightest areas.
- While processing the image in PS, remain in 16 bit per channel ProPhoto for as absolutely long as possible, converting back to sRGB ONLY after all your technical corrections and artistic changes are complete.
- Be sure you are editing / inspecting the image using an enhanced bit depth video card and display (ie, a good IPS panel). This ensures that if you do see banding, it's really in your file, and not just caused by your own (inferior) video system.
HTH,
Tom M
PS - As I recall, there are several good articles in Wikipedia on both banding and JPG compression artifacts.