I love the idea of low resolution of "virtual screen", moreover it's reduced to 256 colors! It allows to use low-resolution textures, simple cubes and "billboard" sprites. I think this idea can be useful not only in demoscene, but in commercial indie games too. Usually indie developers avoid 3D altogether, not because of complexity of 3d engines, but because of complexity of 3d assets. With low-res "screen" you can hand-draw small textures, use sprites instead of 3d models, use rough 3d models and so on, so you can build a game without having large team of artists.
Games seeking this property of low-cost art through pixelated graphics generally choose not to have a retro virtual screen though - which frees them to have different pixel sizes between different parts of the UI, place things precisely (even sub-actual-pixel positions!). I'd prefer they didn't do those things, but I'd also rather have these games get made than not get made.
