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In simple terms, video compression is taking the full-resolution video and squeezing it down to a smaller file size. During compression, each frame is being compared to the frames right before and after it to determine whether any information in common can be discarded.
Most video compression is lossy compression, which means it might reduce quality in the video in order to achieve a smaller file size. This contrasts with lossless compression, which saves less on file size because it does not give up any quality.
When doing any video compression, you are balancing image compression and motion compensation.
Spatial compression means that in any given frame you can discard or “throw away” data without too dramatically affecting the visual perception of the image. If you remember from Chapter 12, “Color Correction and Grading,” the human eye can easily distinguish a change in brightness but cannot easily detect subtle changes in color. So, image compression is more or less the dropping of data throughout the frame to lower the size of the overall file.