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A codec is a program capable of performing encoding and decoding on a digital data stream. The word codec may be a combination of any of the following: 'Compressor-Decompressor', 'Coder-Decoder', or 'Compression/Decompression algorithm'.
Codecs encode a stream of digital data for transmission, storage or encryption and decode it for viewing or editing. Codecs are often used in videoconferencing and streaming video/audio applications.
There are two types of codecs: lossy and lossless. Lossy compression reduces video quality but generates relatively small video files. Examples: XviD/DivX MPEG-4, MP3 codecs. Usually a loss of quality is acceptable.
One exception: codecs indended for creating demonstations/tutorials that use temporal conpression. Such lossless codecs usually work faster than lossy video codecs and generate smaller video files.
What is the difference between demonstration and movie?
The words 'demonstration/tutorial' are used for video with small changes from frame to frame (for example, mouse movement, menu/dialogs displaying etc.) For example, tutorial that explains how to use a program. In this case it is possible to reduce a video size dramatically by using a temporal compression: codec compresses only frame's changes. Unfortunately, this approach can not be used with movies, where there are no small changes. Even video that looks as "static" usually slightly varies from frame to frame. Your eye does not see changes but they are visible for video compresor. Usually codecs indended for a movie compression / decompression use more complex algorithms.
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