It is a term often used for DCT-transformed data. DCT, in this case, breaks the image down into basically an average colour of the whole image, referred to as the DC component, and a bunch of waves that make up the detail of the image, referred to as AC components.
> Could you explain what "AC components" refers to?
All but the first component of the Fourier transform. (The first component is the average of the data.) The term comes from electrical engineering, but Fourier transform has lots of applications also outside of electrical engineering.
I wonder how the efficiency compares to just encoding on the bit level.