All options can be abbreviated to their shortest unique prefix. You may use two hyphens instead of one to designate an option. You may use either white space or equals signs between an option name and its value.
This program is simply a combination of pnmcolormap and pnmremap, where the colors of the input are remapped using a color map which is generated from the colors in that same input. The options have the same meaning as in those programs. See their documentation to understand pnmquant.
It is much faster to call pnmcolormap and pnmremap directly than to run pnmquant. pnmquant is just a convenience.
ppmquant is an older program which does the same thing as pnmquant, but on only PPM images. It is, however, faster than either pnmquant or ppmcolormap/pnmremap.