Abstract: A method and apparatus for processing and encoding video data is presented that allocates available bandwidth, and hence image quality, in dependence upon the relative speed of motion of objects in a sequence of images forming the video data. Fast moving objects are allocated less quality, or precision, than slower moving or stationary objects. In a preferred embodiment of this invention, the quantization step size is dependent upon the magnitude of the motion vector associated with each block in each frame of a video sequence. In a further embodiment of this invention, the quantization step size is also dependent upon the location of each block in each frame, providing more precision to a central area of each frame. To reduce computational complexity, a motion activity map is created to identify areas of higher precision based upon the location and motion associated with each block.