It doesn’t really happen so much on LCD displays, but the old cathode ray tubes used chemicals that flouresce when hit by an electron beam to make their display. These phosphors get dimmer the more they’re used–this is fine if you’re using them evenly across the entire screen, because the whole thing just gets dimmer, but if you have something displayed permanently in one place the phosphors at that point will degrade more than the ones elsewhere on the screen, leaving a permanent image of what’s been displayed.
LCDs do have a thing called “image persistence” which looks kind of the same, but isn’t permanent like CRT burn-in is. It’s caused by the transistors driving the pixels making up the display getting kind of stuck on or off, and usually driving those transistors in the opposite direction for a little while will unstick them.
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