Compression Explained: Lossless vs Lossy, Algorithms, and File Formats

Data compression reduces file size by encoding information using fewer bits, saving storage space, bandwidth, and transfer time. There are two main types: lossless compression, which preserves all original data and suits text or code files, and lossy compression, which permanently removes less noticeable details for greater size reduction in images, audio, and video. Compression algorithms are the underlying methods that shrink data, while file formats like PNG or MP3 are containers that package the output of those algorithms along with metadata. For example, PNG uses the Deflate algorithm, GIF uses LZW, and FLAC applies its own algorithm to raw audio — each format pairing a distinct recipe with a structured wrapper. Understanding this distinction helps clarify why different file types behave differently in terms of quality, size, and recoverability.