Why does vim colorscheme highlights the end of lines?

Question

Today I downloaded the herald color scheme from http://bytefluent.com/vivify.

I have installed it and made some modifications (bg colours). When I first installed it I was inside tmux which had set $TERM to "screen". Later I tried it in plain Terminal.app and noticed that the end of each line is highlighted in various colour, generally the same colour of the last character. An example can be found here (Photobucket, PNG file).

I have commented out the following line, and everything is fine:

hi Normal guifg=#00FF00 guibg=#000000 guisp=#000000 gui=NONE ctermfg=46 ctermbg=256 cterm=NONE

What in this line causes the effect I'm seeing?

~/.vim.colors/herald.vim looks like this:

" Vim color file - herald
" Generated by http://bytefluent.com/vivify 2014-12-16
set background=dark
if version > 580
    hi clear
    if exists("syntax_on")
        syntax reset
    endif
endif

set t_Co=256
let g:colors_name = "herald"

hi IncSearch guifg=NONE guibg=#FF9E16 guisp=#FF9E16 gui=NONE ctermfg=NONE ctermbg=208 cterm=NONE
"hi WildMenu -- no settings --
hi SignColumn guifg=#BF81FA guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=177 ctermbg=256 cterm=NONE
hi SpecialComment guifg=#FFB539 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=221 ctermbg=256 cterm=NONE
hi Typedef guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi Title guifg=#6DF584 guibg=#000000 guisp=#1F1F1F gui=bold ctermfg=84 ctermbg=256 cterm=bold
hi Folded guifg=#003DAD guibg=#001336 guisp=#001336 gui=NONE ctermfg=25 ctermbg=17 cterm=NONE
hi PreCondit guifg=#BF81FA guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=177 ctermbg=256 cterm=NONE
hi Include guifg=#BF81FA guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=177 ctermbg=256 cterm=NONE
hi TabLineSel guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=bold ctermfg=252 ctermbg=256 cterm=bold
hi StatusLineNC guifg=#696567 guibg=#25365a guisp=#25365a gui=NONE ctermfg=242 ctermbg=17 cterm=NONE
"hi CTagsMember -- no settings --
hi NonText guifg=#FC6984 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=204 ctermbg=256 cterm=NONE
"hi CTagsGlobalConstant -- no settings --
hi DiffText guifg=#ED9000 guibg=#12457D guisp=#12457D gui=underline ctermfg=208 ctermbg=6 cterm=underline
hi ErrorMsg guifg=#D0D0D0 guibg=#A32024 guisp=#A32024 gui=NONE ctermfg=252 ctermbg=124 cterm=NONE
hi Ignore guifg=#1F1F1F guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=234 ctermbg=256 cterm=NONE
hi Debug guifg=#FFB539 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=221 ctermbg=256 cterm=NONE
hi PMenuSbar guifg=NONE guibg=#430300 guisp=#430300 gui=NONE ctermfg=NONE ctermbg=52 cterm=NONE
hi Identifier guifg=#70BDF1 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=117 ctermbg=256 cterm=NONE
hi SpecialChar guifg=#FFB539 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=221 ctermbg=256 cterm=NONE
hi Conditional guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi StorageClass guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi Todo guifg=#FC4234 guibg=#000000 guisp=#1F1F1F gui=bold ctermfg=13 ctermbg=256 cterm=bold
hi Special guifg=#FFB539 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=221 ctermbg=256 cterm=NONE
hi LineNr guifg=#696567 guibg=#000000 guisp=#000000 gui=NONE ctermfg=242 ctermbg=NONE cterm=NONE
hi StatusLine guifg=#696567 guibg=#000000 guisp=#000000 gui=NONE ctermfg=242 ctermbg=NONE cterm=NONE
hi Normal guifg=#00FF00 guibg=#000000 guisp=#000000 gui=NONE ctermfg=46 ctermbg=256 cterm=NONE
hi Label guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
"hi CTagsImport -- no settings --
hi PMenuSel guifg=#4C0200 guibg=#F17A00 guisp=#F17A00 gui=NONE ctermfg=52 ctermbg=208 cterm=NONE
hi Search guifg=NONE guibg=#FF9E16 guisp=#FF9E16 gui=NONE ctermfg=NONE ctermbg=208 cterm=NONE
"hi CTagsGlobalVariable -- no settings --
hi Delimiter guifg=#FFEC48 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi Statement guifg=#E783E9 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=176 ctermbg=256 cterm=NONE
"hi SpellRare -- no settings --
"hi EnumerationValue -- no settings --
hi Comment guifg=#696567 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=242 ctermbg=256 cterm=NONE
hi Character guifg=#6DF584 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=84 ctermbg=256 cterm=NONE
"hi Float -- no settings --
hi Number guifg=#6DF584 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=84 ctermbg=256 cterm=NONE
hi Boolean guifg=#E783E9 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=176 ctermbg=256 cterm=NONE
hi Operator guifg=#FC6984 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=204 ctermbg=256 cterm=NONE
hi CursorLine guifg=NONE guibg=#000000 guisp=#000000 gui=NONE ctermfg=NONE ctermbg=NONE cterm=NONE
"hi Union -- no settings --
hi TabLineFill guifg=NONE guibg=#000000 guisp=#000000 gui=NONE ctermfg=NONE ctermbg=NONE cterm=NONE
hi Question guifg=#FFA500 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=214 ctermbg=256 cterm=NONE
hi WarningMsg guifg=#000000 guibg=#FFA500 guisp=#FFA500 gui=NONE ctermfg=NONE ctermbg=214 cterm=NONE
hi VisualNOS guifg=#696567 guibg=#000000 guisp=#000000 gui=NONE ctermfg=242 ctermbg=NONE cterm=NONE
hi DiffDelete guifg=#ED9000 guibg=#081F38 guisp=#081F38 gui=NONE ctermfg=208 ctermbg=17 cterm=NONE
hi ModeMsg guifg=#FFA500 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=214 ctermbg=256 cterm=NONE
hi CursorColumn guifg=NONE guibg=#000000 guisp=#000000 gui=NONE ctermfg=NONE ctermbg=NONE cterm=NONE
hi Define guifg=#BF81FA guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=177 ctermbg=256 cterm=NONE
hi Function guifg=#90CBF1 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=117 ctermbg=256 cterm=NONE
hi FoldColumn guifg=#003DAD guibg=#001336 guisp=#001336 gui=NONE ctermfg=25 ctermbg=17 cterm=NONE
hi PreProc guifg=#BF81FA guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=177 ctermbg=256 cterm=NONE
"hi EnumerationName -- no settings --
hi Visual guifg=#FFB539 guibg=#000000 guisp=#000000 gui=NONE ctermfg=221 ctermbg=NONE cterm=NONE
hi MoreMsg guifg=#FFA500 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=214 ctermbg=256 cterm=NONE
"hi SpellCap -- no settings --
hi VertSplit guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi Exception guifg=#FC4234 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=13 ctermbg=256 cterm=NONE
hi Keyword guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi Type guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi DiffChange guifg=#A36000 guibg=#0B294A guisp=#0B294A gui=NONE ctermfg=130 ctermbg=17 cterm=NONE
hi Cursor guifg=#1F1F1F guibg=#FFEE68 guisp=#FFEE68 gui=NONE ctermfg=234 ctermbg=227 cterm=NONE
"hi SpellLocal -- no settings --
hi Error guifg=#FC4234 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=13 ctermbg=256 cterm=NONE
hi PMenu guifg=#660300 guibg=#140100 guisp=#140100 gui=NONE ctermfg=52 ctermbg=52 cterm=NONE
hi SpecialKey guifg=#E783E9 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=176 ctermbg=256 cterm=NONE
hi Constant guifg=#6DF584 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=84 ctermbg=256 cterm=NONE
"hi DefinedName -- no settings --
hi Tag guifg=#FFB539 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=221 ctermbg=256 cterm=NONE
hi String guifg=#FFB539 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=221 ctermbg=256 cterm=NONE
hi PMenuThumb guifg=NONE guibg=#720300 guisp=#720300 gui=NONE ctermfg=NONE ctermbg=52 cterm=NONE
hi MatchParen guifg=#1F1F1F guibg=#FFA500 guisp=#FFA500 gui=NONE ctermfg=234 ctermbg=214 cterm=NONE
"hi LocalVariable -- no settings --
hi Repeat guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
"hi SpellBad -- no settings --
"hi CTagsClass -- no settings --
hi Directory guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi Structure guifg=#FFEE68 guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=227 ctermbg=256 cterm=NONE
hi Macro guifg=#BF81FA guibg=#000000 guisp=#1F1F1F gui=NONE ctermfg=177 ctermbg=256 cterm=NONE
hi Underlined guifg=#FC4234 guibg=#000000 guisp=#1F1F1F gui=underline ctermfg=13 ctermbg=256 cterm=underline
hi DiffAdd guifg=#ED9000 guibg=#006124 guisp=#006124 gui=NONE ctermfg=208 ctermbg=22 cterm=NONE
hi TabLine guifg=#1F1F1F guibg=#141414 guisp=#141414 gui=NONE ctermfg=234 ctermbg=233 cterm=NONE
hi cursorim guifg=#1F1F1F guibg=#FFEE68 guisp=#FFEE68 gui=NONE ctermfg=234 ctermbg=227 cterm=NONE
"hi clear -- no settings --
hi htmlitalic guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=italic ctermfg=252 ctermbg=256 cterm=NONE
hi htmlboldunderlineitalic guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=bold,italic,underline ctermfg=252 ctermbg=256 cterm=bold,underline
hi htmlbolditalic guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=bold,italic ctermfg=252 ctermbg=256 cterm=bold
hi htmlunderlineitalic guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=italic,underline ctermfg=252 ctermbg=256 cterm=underline
hi htmlbold guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=bold ctermfg=252 ctermbg=256 cterm=bold
hi htmlboldunderline guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=bold,underline ctermfg=252 ctermbg=256 cterm=bold,underline
hi htmlunderline guifg=#D0D0D0 guibg=#000000 guisp=#1F1F1F gui=underline ctermfg=252 ctermbg=256 cterm=underline
"hi default -- no settings --

Answer 1

1. First problem:

   hi Normal …
   

   must be the first highlight group definition in your colorscheme.

2. Second problem:

   The xterm palette only goes from 0 to 255 so there is no 256. You can use 0 or 16 for Black.

3. Third problem:

   Vim decides how many colors are supported by your terminal emulator based on the value of $TERM. Set your terminal emulator up for 256 colors if you want but don't do that in Vim itself.