Abstract: Coding and decoding of video images includes the use of multiple reference pictures and determining motion vector and time delay information for the video images. Video images are quantized and transmitted with the motion vector and time delay information from a first station to a second station. A new video image is predicted for display at the second station as function of the motion parameter codes and multiple reference pictures. The invention may be used in connection with a video communication and/or video conferencing system as a long-term memory predictor to improve image-coding efficiencies and motion compensation. The long-term memory prediction extends the spacial displacement utilized in block-based hybrid video coding by a variable time delay. The arrangement and method employ a proposed bit allocation scheme to provide increased coding efficiencies of the video coder.