Understanding video from an algorithmic perspective:

After examining the video acquisition issue, we proceed to the codec issue and study the algorithmic side of the encoding problem.

For engineers versed in the definition of MPEG as an encoding format, it is important to remember the nature of the content being encoded is not random bits and bytes, but actual snapshots of the real world (ie: actual physical objects that follow physical laws of motion and interaction).

The key focus being on physical objects with layers and depth. Video is essentially a series of consecutive moving 2D images (bitmaps).

This is why, when given raw moving pictures (bitmaps), an encoding system that can obtain better understanding of the particular characteristics of the moving pictures will always perform a better job at encoding the video efficiently. Some of these techniques are discussed briefly at the end of the next section.

The digital audio video encoder (codec).

Once the Video ADC noise issues are resolved, we have to consider the most computationally intensive portion of the chain ---the encoder.

MPEG2 is the established compression standard for AV today. It is used in DVD players and Digital Set Top Boxes. Because MPEG2 has been around for so long, it was accepted wisdom that building commercial MPEG2 encoders is a well understood problem and one only needs to select the lowest cost part. This is not the case: there are a virtually unlimited numbers of ways to encode the same video sequence to produce different MPEG2 streams, and even when the input stream is clean, the real challenge for the various commercially enabled systems is in how they perform at lower bitrates.
There are commercially available MPEG2 encoders today that can produce equivalent quality video at . and even 1/3 the size (bitrate) of other encoders. The difference comes in the various tools available to the encoders and in innovations in algorithms that are still unknown to most engineers using these applications for product development.  

A partial list of tools and innovations available to MPEG encoder chips:

These are closely guarded secrets, not few in the industry will talk openly about them.

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