PETSCII is the ASCII code of the C64. It is also called CBM-ASCII or PET-ASCII. It is a defined character set of 256 characters (i.e. 8 bits). Each displayable character is embedded internally in an 8x8 pixel matrix.

There are two modes that are used. One mode has uppercase letters as a subset, and the other mode has uppercase and lowercase letters as a subset, and there are other graphical special characters in both modes.

So you have one of the two modes including a defined character color per character, a global background color and the frame color. The respective color can be selected from a range of 16 colors.

The screen area contains 40x25 = 1000 characters without a frame.

The art of using these characters as graphics is called block graphics or character set graphics.