Lossy
Overview
The term lossy is used to describe data compression that does not retain all of the original information. Most lossy compression schemes used for visual or auditory information employs perceptual coding which is based on research on how the human mind processes the "information" it receives through the eyes or ears.
Basics
The main advantage of lossy compression is that it reduces the total amount of data required to represent the original information. This typically results in smaller file size or less bandwidth required to transmit the information in exchange for absolute accuracy. One of the earliest widespread uses of lossy compression was for voice communication in telecommunications.
There are parallels in visual technologies such as digital photography and video, with JPEG commonly used for images and MPEG for DVD video.
In systems like MP3 (which is actually an adaptation of the audio layer 3 of the MPEG-1 and MPEG-2 video format), the amount or degree of compression may be user selectable at the time of encoding. The higher the level of compression (less data), the lower the quality of the resulting audio.