Data Compression

What is data compression?
Data compression is the process of encoding information using fewer bits than the original representation would use.
What is a data compression ratio?
Data compression ratio also known as compression power, is the term used to quanitfy the reduction in data- represenation size produced by a data compression algorithm. The ratio is identified between the compressed size and the uncompressed size. For eg:
 {\rm Compression\;Ratio} = \frac{\rm Compressed\;Size}{\rm Uncompressed\;Size}
Why is data compression an important technique for the online world?
Compression is an important technique for the online world because it helps reduce the consumption of expensive resources. Examples include such as hard disk space or transmission bandwith.
What is the difference between Lossy and Lossless data compression?
Lossless
Lossless data compression makes use of data compression algorithms that allow the exact orginal data to be reconstructed from the compressed data. This can be contrasted to a lossy data compression, which does not allow the exact original data to be reconstructed from the compressed data.
Lossless data compression can be categorized according to the type of data they are designed to compress. Some main types of targets for compression algorithms are text, executables, images and sound.
Lossy
On the other hand lossy data compression method is one where compressing data and then decompressing it retrieves data that may well be different from the original, but is "close enough" to be useful ins someway. Lossy data is frequently used on the Internet especially in streaming media and telephony applications. These methods are typically referred to as codecs in this context.
Which method offers the greatest compression ratio?
The method which offers the most compression is Lossless.

Why is human psychology and perception an important factor in methods of Lossy compression?
Human physcology and perception plays a very essential role in the methods of lossy compresssion. This is because because only a certain amount of data can be discarded before it is noticed by the human eye.
Name Lossy file formats for audio, still image and video format.
The Lossy file name for :
Audio is -  FLAC this stands for Free Lossless Audio Codec which is a similar file to an mp3.
Image- PNG & GIF are another name for a lossy file format.
Video Format- MPEG