Abstract: Hierarchal encoding of an image is achieved by first deriving a picture element array of binary coded intensity values representing the image and then deriving from the intensity values of the picture element array a sequence of hierarchal codes consisting of one of the intensity values as the first code followed by n-1 cyclic differences between n-1 distinct pairs of intensity values, where n is the total number of intensity values of the picture element array. The distinct pairs of intensity values are systematically selected by making alternating horizontal and vertical passes through the picture element array of intensity values. In each horizontal pass, consecutive nonoverlapping adjoining pairs of intensity values are selected along consecutive rows of the picture element array and successive undersampled arrays, the undersampled array for a horizontal pass being constructed by eliminating every other row from the undersampled array for the preceding vertical pass.