Summary: The smallest possible height that a font can be, while remaining legible, is 3 pixels. Additional legibility can be gained if the font is made to be 4 pixels tall, and the legibility increases manyfold when the height is increased to 5 pixels.

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Creation of a 3 pixel tall font presents the challenge of not being able to represent letters with open loops, such as A,B,D,P, and R, with the actual open loops. The letter is kept legible, however, by keeping some in their lowercase form, such as B and D, while others are kept legible by keeping them distinct from other letters. An esthetic constant width is impossible to keep when creating a 3 pixel tall font, however, since some of the elements of letters require multiple  horizontal pixels to represent, such as the vertical lines in M and W, while the width of most other letters only requires 3 horizontal pixels.

A 4 pixel tall font resolves most of the problems with a 3 pixel tall font: open loops are present, and a constant width is possible to achieve, though it is not demonstrated in the above sample image. A problem not solved, however, and which is also present in the 3 pixel tall font, occurs on letters with multiple horizontal features, such as the letters E and F. This problem is solved by using a 5 pixel tall font.

A 5 pixel tall font resolves all problems of the 3 and 4 pixel tall fonts. Font look and feel can begin to be created at 5 pixels, since corners can now be rounded. Compare the text at the bottom of the above image with the 5 pixel tall sample image.