Lossless and lossy compression are terms that describe whether or not, in the compression of a file, all original data can be recovered when the file is uncompressed. With lossless compression, every single bit of data that was originally in the file remains after the file is uncompressed. All of the information is completely restored. This is generally the technique of choice for text or spreadsheet files, where losing words or financial data could pose a problem. The Graphics Interchange File (GIF) is an image format used on the Web that provides lossless compression.
On the other hand, lossy compression reduces a file by permanently eliminating certain information, especially redundant information. When the file is uncompressed, only a part of the original information is still there (although the user may not notice it). Lossy compression is generally used for video and sound, where a certain amount of information loss will not be detected by most users. The JPEG image file, commonly used for photographs and other complex still images on the Web, is an image that has lossy compression. Using JPEG compression, the creator can decide how much loss to introduce and make a trade-off between file size and image quality.