It does this by exploiting redundancies in the data. By reducing the number of bits used to store a set of data, we not only reduce the space required to store it, we also reduce the bandwidth needed to transmit it. In the world of digital video, we need both. We typically speak of a compressor reducing the bandwidth or data rate of a signal, with the understanding that it also reduces storage requirements. Because digital video is data intensive.
Compression is required simply to make computer handling of video economically feasible.
All digital compression is a gamble. Fortunately, any normal video picture has a significant amount of such redundancy. However, it is always possible to come up with a video image, realistic or not, which can overwhelm a compressor to the point where it cannot maintain a quality image. It is this kind of failure that has given compression a bad reputation in some circles. Because compression is not much use without a way to decompress and recover the original data, we normally speak of compressor-decompressor pairs, or codecs.