Video takes up a lot of space. Uncompressed footage from a camcorder takes up about 17MB per second of video. Because it takes up so much space, video must be compressed before it is put on the web. “Compressed” just means that the information is packed into a smaller space. There are two kinds of compression: lossy and lossless.
Lossy compression means that the compressed file has less data in it than the original file. In some cases this translates to lower quality files, because information has been “lost,” hence the name. However, you can lose a relatively large amount of data before you start to notice a difference. Lossy compression makes up for the loss in quality by producing comparatively small files. For example, DVDs are compressed using the MPEG-2 format, which can make files 15 to 30 times smaller, but we still tend to perceive DVDs as having high-quality picture.
Lossless compression is exactly what it sounds like, compression where none of the information is lost. This is not nearly as useful because files often end up being the same size as they were before compression. This may seem pointless, as reducing the file size is the primary goal of compression. However, if file size is not an issue, using lossless compression will result in a perfect-quality picture. For example, a video editor transferring files from one computer to another using a hard drive might choose to use lossless compression to preserve quality while he or she is working.