Naturally there are several options for what you are asking – but it also depends on what you really need as end result.
One possibility might be
Layer > New Adjustment Layer > Posterize
Another one would be to create copy of the image and use
Image > Mode > Indexed Color
and then edit the Palette (number of colors for example) and Options as needed.
It sounds like you are talking about a cartoon type gif image, and the Indexed colour is definitely the way to do that as above, but if you want to keep it as a jpg then Save for Web is a very useful tool, and you can see what affect it has on file size as you adjust the output options. But I think you already had the right answer.
Sorry I didn't put in more detail. These are for drawings that belong to me or that I have a license for. They're png and jpg files but they are not going on the web. I need to reduce the colors down to no more than 4. I tried the posterize idea, and earlier today I found a 'Save for web and devices' idea which does something very similar to the Image>Mode>Indexed color idea above, which I just tried (thanks, c.pf).
I don't know what this other guy did (the one I talked about in my first message) but they insist he did it very easily using Photoshop (CS5). I tried a lot of things before and after I wrote this help message, based on web suggestions. But I realized with these last two ideas I tried that this can't be done, at least not completely. In my head, I thought that I would be able to reduce the picture to (for this example) 4 colors of my choosing. The colors can be any pms color.
So, based on your help I found that if the areas were enclosed I could make them black and white and use color fill. But some of the items aren't one color even though they look like it. I would have to paint the pixels one color and this would take a long time even if they were enclosed. They tell me he just made these and he didn't have much of a knowledge of Photoshop, either. But it's looking like it's not that simple. Thanks again for your help.
It is not clear to me what your issues are with the previous suggestions.
If you change your image to index color mode, specify 4 colors, force custom colors and select your choice of 4 Pantone colors then it would seem that ALL your criteria are met. Perhaps you could post an example of an original & modified imaged that the previous designer produced and specify what is wrong with the index color approach, someone might be able to help.
Are you sure that he was using Photoshop? (see my third solution)
There are some plug-ins for Photoshop, but they basically do the same as the posterize or index mode: http://www.topazlabs.com/simplify/ (commercial) see this panel for colorizing comic art: http://vimeo.com/user3771002/videos
I would rather use posterize, as an adjustment layer, as you can control it.
Try with this layer stack, from bottom to top:
Convert the original image in a Smart Object, in order to use Smart filters and blur the image (Gaussian Blur, or noise>median or blur>smart blur or blur>surface blur could be interesting internatives) would be useful, to make smoother posterized areas.
A dodge/burn layers (a neutral gray layer in overlay mode) to adjust areas using the Dodge/burn tools.
the Posterize Adjustment layer, with very few colors
On top of it, put a gradient map adjustment layer, to control the posterized colors
Vectorizing in Illustrator can also be used to reduce the number of colors. Live Trace: http://help.adobe.com/en_US/illustrator/cs/using/WS714a382cdf7d304e7e07d0100196cbc5f-6229a .html