This is always misreported. It's true that we can't distinguish between two adjacent rgb values (in most cases, on most displays...), which is where this comes from. But as you say, displays only cover a portion of the space.
The easiest example I usually give is with blacks-- computer monitors just can't reproduce the absence of light well.
The easiest example I usually give is with blacks-- computer monitors just can't reproduce the absence of light well.