Most existing efforts in image and video compression have focused on develo
ping methods to minimize not perceptual but rather mathematically tractable
, easy to measure, distortion metrics, While nonperceptual distortion measu
res were found to be reasonably reliable for higher bit rates (high-quality
applications), they do not correlate well with the perceived quality at lo
wer bit rates and they fail to guarantee preservation of important perceptu
al qualities in the reconstructed images despite the potential for a good s
ignal-to-noise ratio (SNR). This paper presents a perceptual-based image co
der, which discriminates between image components based on their perceptual
relevance for achieving increased performance in terms of quality and bit
rate. The new coder is based on a locally adaptive perceptual quantization
scheme for compressing the visual data. Our strategy is to exploit human vi
sual masking properties by deriving visual masking thresholds in a locally
adaptive fashion based on a subband decomposition. The derived masking thre
sholds are used in controlling the quantization stage by adapting the quant
izer reconstruction levels to the local amount of masking present at the le
vel of each subband transform coefficient. Compared to the existing non Loc
ally adaptive perceptual quantization methods, the new locally adaptive alg
orithm exhibits superior performance and does not require additional side i
nformation. This is accomplished by estimating the amount of available mask
ing from the already quantized data and linear prediction of the coefficien
t under consideration, By virtue of the local adaptation, the proposed quan
tization scheme is able to remove a large amount of perceptually redundant
information. Since the algorithm does not require additional side informati
on, it yields a low entropy representation of the image and is well suited
for perceptually lossless image compression.