How do hexadecimal numbers or whatever work?

[rubah]

2^16 is 65536, so 65535 is the largest number you can store in two bits. 15 to store the digits and 1 to store the information about the file.

Are you sure you're not thinking of two bytes? Because the maximum 2-bit value is 4. 2² .

Probably. At least I didn't refer to nibbles! or is it nybbles?