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Branch of information theory which provides the theoretical foundations for lossy data compression

Rate–distortion theory is a major branch of information theory which provides the theoretical foundations for lossy data compression; it addresses the problem of determining the minimal number of bits per symbol, as measured by the rate R, that should be communicated over a channel, so that the source (input signal) can be approximately reconstructed at the receiver (output signal) without exceeding an expected distortion D.

Rate–distortion theory gives an analytical expression for how much compression can be achieved using lossy compression methods. Many of the existing audio, speech, image, and video compression techniques have transforms, quantization, and bit rate allocation procedures that capitalize on the general shape of rate–distortion functions. Rate–distortion theory was created by Claude Shannon in his foundational work on information theory. In rate–distortion theory, the rate is usually understood as the number of bits per data sample to be stored or transmitted. The notion of distortion is a subject of on going discussion. In the most simple case (which is actually used in most cases), the distortion is defined as the expected value of the square of the difference between input and output signal (i. e., the mean squared error). However, since we know that most lossy compression techniques operate on data that will be perceived by human consumers (listening to music, watching pictures and video) the distortion measure should preferably be modeled on human perception and perhaps aesthetics: much like the use of probability in lossless compression, distortion measures can ultimately be identified with loss functions as used in Bayesian estimation and decision theory. In audio compression, perceptual models (and therefore perceptual distortion measures) are relatively well developed and routinely used in compression techniques such as MP3 or Vorbis, but are often not easy to include in rate–distortion theory. In image and video compression, the human perception models are less well developed and inclusion is mostly limited to the JPEG and MPEG weighting (quantization, normalization) matrix.

Distortion functions measure the cost of representing a symbol by an approximated symbol Typical distortion functions are the Hamming distortion and the Squared error distortion.

Suppose we want to transmit information about a source to the user with a distortion not exceeding D. Rate–distortion theory tells us that at least bits/symbol of information from the source must reach the user. We also know from Shannon's channel coding theorem that if the source entropy is H bits/symbol, and the channel capacity is C (where ), then bits/symbol will be lost when transmitting this information over the given channel. For the user to have any hope of reconstructing with a maximum distortion D, we must impose the requirement that the information lost in transmission does not exceed the maximum tolerable loss of bits/symbol. This means that the channel capacity must be at least as large as .