Abstract: A cost effective continuously adaptive digital video system and method for compressing color video data for moving images. The method describes capturing an analog video frame and digitizing the image into a preferred source input format for compression using a combination of unique lossy and lossless digital compression techniques including subband coding, wavelet transforms, motion detection, run length coding and variable length coding. The system includes encoder and decoder (CODEC) sections for compression and decompression of visual images to provide high compression with good to excellent video quality. The compressed video data provides a base video layer and additional layers of video data that are multiplexed with compressed digital audio to provide a data stream that can be packetized for distribution over inter or intranets, including wireless networks over local or wide areas.