Abstract: A digitizing system for automatically recording data points representative of, for example, sheet metal templates having varying shapes is disclosed. A stylus connected to a tracing arm is guided along the edge of a template. As the arm moves, digital scales generate a stream of encoded electrical pulses which yield direction and distance information. These pulses are then decoded, counted, and stored. If the operator has selected the automatic digitize mode, a data point is automatically stored each time the stylus moves a predetermined distance in the X, Y, or Z direction. The present invention also provides an improved method of optimizing or compressing the stored set of data points.