Floating point numbers with 16 bits of precision are used mostly in computer graphics. They are also called half precision floating point numbers (as having half the bits of single precision 32bit floats). There’s one sign bit, five bit exponent, and ten bits for mantissa. Half floats are not really meant to be used for arithmetic computations due to the limited precision (and no support in common CPUs/FPUs).
Half floats first appeared in early 2000s as samples in images and textures. Floats provide higher dynamic range than what is available with regular 8bit or 16bit integer samples. On the other hand, commonly used single and double precision floats have much higher memory cost per pixel. Half floats have more reasonable memory requirements and their precision is adequate for many usages in imaging.
16bit float formats have been supported by ATI and NVidia GPUs for many years. I’m not sure about other IHVs but at least Direct3D 10 capable GPUs should all support it.
Read on if your interested how to convert between half and single precision floats (Object Pascal code).