Fun fact: They did this exact same thing in 3D with the characters in Vagrant Story All you have to do is duplicate the model, offset it by a few onscreen pixels, and set it to fullbright/tinted. The lit character model hides the polygons of the secondary mesh, giving a nice rim light
Some areas in Paper Mario feature a rim lighting effect that is achieved in a manner that is extremely simple for the surprisingly effective results it produces, being simply shifting around a shadow copy of the sprite.
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