[hnlmorg]

Lossless compression is where you reduce the file size without removing the audio / video data. Where as lossy compression is where you reduce the file size by reducing the audio / video content (typically using methods that are non-obvious to observers)

An easy but somewhat crude comparison would be a text file that reads:

“Space,” it says, “is big. Really big. You just won’t believe how vastly, hugely, mindbogglingly big it is. I mean, you may think it’s a long way down the road to the chemist’s, but that’s just peanuts to space.”

Lossless would be putting that content into a ZIP file (eg winzip / 7zip / etc).

Where as lossy would be rewriting the passage to something like:

“Space is really big. You just won’t believe how vastly, hugely, mindbogglingly big it is. You may think it’s a long way down the road to the chemist’s, but that’s just peanuts to space.”

Generally lossy compression will yield better compression because you can vastly reduce the information you need to compress and then apply lossless techniques as well.