Data Compression : Lossy and Lossless
Lossless compression lets you recreate the original file exactly
LZ adaptive dictionary-based algorithm is a well known example
Breaking a file into a "smaller" form for transmission or storage
and then putting it back together on the other end so it can be used again.
works well ( good "file-reduction ratio" ) with text file, and programming
source
far less efficient with complex data like sound or bitmap pictures
Lossy compression eliminate "unnecessary" bits of information
E.g. : the sky in a picture is blue, but most of the pixels are with a different
blue.
The compression codec would chose an average blue and apply it to the pixels
not to far from that average value.
No way to get the lost information back after such an alteration
You are not supposed to notice the change
This sort of compression can't be use for anything that needs to be reproduced
exactly
Source: http://computer.howstuffworks.com/file-compression1.htm