While GAS normally writes only "pure" 32-bit i386 code, it has limited support for writing code to run in real mode or in 16-bit protected mode code segments. To do this, insert a `.code16' directive before the assembly language instructions to be run in 16-bit mode. You can switch GAS back to writing normal 32-bit code with the `.code32' directive.
GAS understands exactly the same assembly language syntax in 16-bit mode as in 32-bit mode. The function of any given instruction is exactly the same regardless of mode, as long as the resulting object code is executed in the mode for which GAS wrote it. So, for example, the `ret' mnemonic produces a 32-bit return instruction regardless of whether it is to be run in 16-bit or 32-bit mode. (If GAS is in 16-bit mode, it will add an operand size prefix to the instruction to force it to be a 32-bit return.)
This means, for one thing, that you can use GNU CC to write code to be run in real mode or 16-bit protected mode. Just insert the statement `asm(".code16");' at the beginning of your C source file, and while GNU CC will still be generating 32-bit code, GAS will automatically add all the necessary size prefixes to make that code run in 16-bit mode. Of course, since GNU CC only writes small-model code (it doesn't know how to attach segment selectors to pointers like native x86 compilers do), any 16-bit code you write with GNU CC will essentially be limited to a 64K address space. Also, there will be a code size and performance penalty due to all the extra address and operand size prefixes GAS has to add to the instructions.
Note that placing GAS in 16-bit mode does not mean that the resulting code will necessarily run on a 16-bit pre-80386 processor. To write code that runs on such a processor, you would have to refrain from using any 32-bit constructs which require GAS to output address or operand size prefixes. At the moment this would be rather difficult, because GAS currently supports only 32-bit addressing modes: when writing 16-bit code, it always outputs address size prefixes for any instruction that uses a non-register addressing mode. So you can write code that runs on 16-bit processors, but only if that code never references memory.