CNET GLOSSARY: Terms for the techie
A generic term for any technology that enables data to take up less space. Compression can be applied to data files, images, audio, or video. Lossless compression is used for software, text files, or any application where all the original bits must be retained when a file is decompressed. Lossy compression is most often used for digital audio, video, or images, where some of the original data can be sacrificed to reduce large file sizes. Lossy compression degrades the quality of the original data somewhat. But the smaller file size makes the data much easier to store and faster to transmit.
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