Abstract: An apparatus and method for signal processing employing intraframe and interframe variable prediction transform coding. Images are represented by sequential frames of two-dimensional arrays of digital signals. The digital signals are transformed to form transform coefficients for each frame. Predicted transform coefficients are formed using sets of variable prediction factors. The predicted transform coefficients for each frame are compared with corresponding actual transform coefficients for the frame to form transform coefficient difference signals. The difference signals are processed to control their range of values. The processed difference signals are statistically coded such that the more frequently occurring values are represented by shorter code lengths and the less frequently occurring values are represented by longer code lengths. The coded signals are stored in a buffer memory for transmission.