[jarenmf]

Could you please elaborate on the link of error diffusion to information theory? as far as I understand error diffusion minimizes the quantization error for lower frequencies on the expense of adding more noise to higher frequencies. i.e it seems to be only optimizing for human perception

[bob1029]

You're right - in pure information theoretic terms there is nothing special happening here. It's a tradeoff like always. But, in human perceptual terms (i.e. how JPEG/MPEG are designed), you may find substantial gain in useful information per bit by applying dithering.

The useful amount of information represented by any given bit of data is much larger in this arrangement. 1 bit = 1 entire pixel. In other schemes, you have upwards of 24 bits representing the contents of 1 pixel. To human eyes, only 8 of these bits really matter. You can usually throw away 50% of the other 16 without anyone noticing.