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The same principle is being used in the "standard" method for smooth iteration count (called "continuous potential method" in The Science of Fractal Images book). In theory, it works best for a bailout radius much larger than 2. Much further away from the Mandelbrot set, subsequent level sets (i.e. adjacent color bands) are both much better approximations to concentric circles. So one can use some expression based on |z| to interpolate between adjacent colours.

  Woohoo 
Smooth Shading!

I suspect Hobold is referring to this http://linas.org/art-gallery/escape/smooth.html method.
I copied it for my Smooth Shading plugin for Fractal Extreme http://sourceforge.net/projects/fxsmoothbrot/
A good clear example of the algorithm http://www.codeproject.com/Articles/18361/Mandelbrot-Set-with-Smooth-Drawing

Perhaps you are already using the mu = N + 1 - log (log  |Z(N)|) / log 2 method without the 2 extra iterations or a larger bailout of 4?
Those two extra iterations and larger bailout was a challenge for the FX plugin.
FX has a extended precision format that is an array of words (32 or 64 bit).
The most significant word contains a fixed decimal place and a small number of bits to store the integer portion of the numbers.
Increasing the bailout and doing 2 extra iterations meant blowing the largest possible integer that could be represented in 5 bits.
So I added a whole word of integers to the array and added another word of decimals (bicimals?) at the other end of the array to preserve accuray.
I only add the extra words once the loop exceeds the ordinary bailout of 2, that way there's no extra arithmetic until the end of the iterations.
There are other wrinkles, like how to extend the high precision array if the value is a negative twos' compliment representation,
adding a method to convert from high precision to double float for the final logarithms.
Its all in my code, if you can read it, sorry I'm not a regular c++ coder so it might be a little ugly.

And here is another - with color cycling
<a href="http://www.youtube.com/v/gxfdT0mO5Ak&rel=1&fs=1&hd=1" target="_blank">http://www.youtube.com/v/gxfdT0mO5Ak&rel=1&fs=1&hd=1</a>

No, sometimes you need to add several references in the center of glitches.