Lossy
A compression technique that does not decompress data back to 100% of the original. Lossy methods provide high degrees of compression and result in very small compressed files, but there is a certain amount of loss when they are restored.
Audio, video and some imaging applications can tolerate loss, and in many cases, it may not be noticeable to the human ear or eye. In other cases, it may be noticeable, but not that critical to the application. The more tolerance for loss, the smaller the file can be compressed, and the faster the file can be transmitted over a network. Examples of lossy file formats are MP3, AAC, MPEG and JPEG.
Lossy compression is never used for business data and text, which demand a perfect "lossless" restoration
Lossless
compression technique that decompresses data back to its original form without any loss. The decompressed file and the original are identical. All compression methods used to compress text, databases and other business data are lossless. For example, the ZIP archiving technology (PKZIP, WinZip, etc.) is a widely used lossless method (see ZIP file).
Although most compression methods used for audio and video are "lossy" and discard bits deemed unnecessary, there are also lossless audio methods. Apple Lossless, WMA Lossless and FLAC are examplesof lossless compression applied to CD audio. Such methods reduce a full audio CD only to about half its original size rather than 1/10th the original as with MP3; however, no bits are discarded
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