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Bitcrushing is a great way to add some lofi crunchiness to your tracks, although it can be difficult to control. Dither can help fine-tune the bitcrushing effect to get exactly the sound you want.
We'll be using the Fruity Squeeze effect in FL Studio and the free mda Dither, which is available from http://mda.smartelectronix.com/effects.htm, but any similar plugins should work in the same way.
Dither is low-level noise added to the audio signal in an effort to keep the level of the audio from dropping below the least significant bit. In other words, it makes the quiet parts of the audio slightly louder so that more of the signal can be heard when the bit depth is reduced. Here is a visual example of this, with a snare drum:
And this is what these sound like:
Route the audio you wish to bitcrush to a mixer track, insert a dither plugin and a bitcrusher immediately after it. Mute the dither plugin, we'll come back to it later.
The Fruity Squeeze plugin opens with some default settings that we'll have to reset. Click the green light next to the 'Filter' label to disable the filter, turn the 'Amount' knob in the bottom left all the way to the right to disable the Puncher effect and drag the 'Mix' slider all the way up. Now we should be left with nothing but the bitcrushing or 'Squarize' effect.
Adjust the bitcrushing effect until you get the amount of crunchiness that you want. Don't worry too much if it causes some silences in the audio (that's what the dither is for).
Once you have the bitcrusher set, unmute the dither plugin and adjust it's settings. More extreme amounts of bitcrushing will need higher levels of dither to make an impact. In the mda Dither plugin, turn the 'Word Length' knob all the way down. This will let you make the dither as loud as possible. Adjust the other three controls to taste. The 'Dither' knob selects between three different kinds of dither, each will impart a different flavor on the audio. Use the 'Dither Amp' control to fine-tune the level of dither and mess around with 'DC Trim' as well. This is going to be largely trial and error.
Fine-tune everything, including the level of the audio going into the mixer track and the wet/dry mix of the bitcrusher, and you're done! Here's what I cam up with, dry, without dither and then finally with dither.