From Sonic Retro
But what is it for? Luigi Link explains:
|“||As you may know, the developers at Sonic Team had no SonED to edit their levels with, and if they did, it was much more primitive than ours. Knowing this, they programmed a debug mode in the Sonic games to get the information they needed to know from the game.
The "Night Mode" itself is actually pretty useful. It takes advantage of the VDP's shadowing and highlighting ability. For all tiles on the Plane A High and Plane B High graphic layers, the VDP highlights those tiles. For all tiles on the Plane A Low and Plane B Low graphic layers, the VDP shadows these tiles. Sonic Team could then see if they got the highs and lows in their proper spot.