While manipulating an image to use as an example in another thread, I discovered that one can get some wild posterization effects in Vegas by stacking Levels fx to intentionally reduce the bit depth.

Filter 1:
Output Start = .494
Output End = .506

Filter 2:
Input Start = .494
Input End = .506

This is just an example; infinite variations are possible, from subtle "rotoscope" effect to cartoonish to psychedelic. Feel free to post your creations also.