[ZeroGravitas]

I was under the impression that Wavelets were something of a dead-end. As far as I picked it up the wavelets need to be tuned for your output. People have tuned them for great PSNR output but not for SSIM or other perceptual outputs so you get output that is blurry sometimes even compared with JPEG. I'm not sure if this is a fundamental problem with the technique, or just something that's currently impracticable compared with less elegant but working alternatives.

There's more here (though it's talking about video issues too): http://x264dev.multimedia.cx/archives/317

[mirsadm]

That is a big problem with the wavelet based approaches. They tend to be tuned for impressive PSNR numbers which doesn't always correspond well to perceptual image quality. I haven't seen that article in a while and he raised many valid points.

I think wavelets do have a future but it will just take more time and research. I'm not too sure what the state of it is at the moment as it has been a while since I've looked into it. It is my opinion that in time wavelet based compression will become more important though.

Edit: I forgot to mention that one really cool thing about wavelet codecs (for video especially) is that they are easy to scale by decoding portions of the bit stream. This is really useful for streaming as you can vary the image quality without too much work.