Digital Signal Processing (DSP) is the technology developed to analyze and/or manipulate information for specific applications. Compared to ordinary digital processing, DSP is distinguished by the unique type of data it uses: signals. These signals, as the term suggests, are to be in digital form for processing techniques to be applied. Because these signals originate as sensory data from the real world, most are initially in analog form and requires prior conversion into digital form.

A digital signal consists of a stream of numbers (usually in binary form), and in effect, processing of a digital signal is simply done by performing numerical calculations. Although the Mathematical theory behind the different DSP techniques are quite complex, the mathematical operations involved in the actual implementation of these techniques are very simple, involving mainly basic operations that could be done on a cheap four-function calculator.

The DSP’s versatility (can be reprogrammed for other applications) and repeatability (can be easily duplicated) also allowed it to be utilized in more important and more complex applications such as data compression. Since data storage and transmission cost money, it is ideal to represent data files in the most compact form during transmission and storage. The use of DSP is highly significant in the development and the actual process of data compression.

Historically, the origins of signal processing were developed in electrical engineering, the signal being an electrical signal carried through wires or telephone lines, or perhaps by radio waves. More generally, however, a signal is a stream of information representing anything from a visual image to the data from a remote-sensing satellite. In most cases, the signal is initially in the form of an analog electrical voltage or current, produced for example by a microphone or some other type of transducer.

In some cases however, like the output from the readout system of a CD (compact disc) player, the data is already in digital form and conversion is no longer necessary. An analog signal, for example, can be digitized using an analog-to-digital converter or ADC. This generates a digital output as a stream of binary numbers that represents the electrical current input. Signals are usually processed in many ways depending on the application it is for. For example, the output signal from a transducer may be contaminated with unwanted electrical "noise".

Processing the signal using a filter circuit can remove or at least reduce the unwanted part of the signal. The development of digital signal processing dates from the 1960's with the use of mainframe digital computers for number-crunching applications such as the Fast Fourier Transform (FFT), which allows the frequency spectrum of a signal to be computed rapidly. These techniques were not widely used at that time because suitable computing equipment was generally available only in universities and other scientific research institutions.

The introduction of the microprocessor in the late 1970's and early 1980's made it possible for DSP techniques to be used in a much wider range of applications. The increasing importance of DSP led several major electronics manufacturers to develop Digital Signal Processor chips - specialized microprocessors designed specifically for the types of operations required in digital signal processing. DSP technology is now commonly used in mobile phones, multimedia computers, video recorders, CD players, hard disc drive controllers and modems, and will soon replace analog circuitry in TV sets and telephones.

An important application of DSP is in data compression and decompression. A compression program is used to convert data from a native format to one optimized for compactness. A decompression program returns the compressed format to a usable form which may or may not be a replication of the original. Signal compression is used in digital cellular phones to allow a greater number of calls to be handled simultaneously within each local "cell".

DSP signal compression technology allows people not only to talk to one another but also to see one another on their computer screens, using small video cameras mounted on the computer monitors, with only a conventional telephone line linking them together. The architecture of a DSP chip is designed to carry out such operations incredibly fast, processing hundreds of millions of samples every second, to provide real-time performance: that is, the ability to process a signal "live" as it is sampled and then output the processed signal, for example to a loudspeaker or video display.

All of the practical examples of DSP applications mentioned earlier, such as hard disc drives and mobile phones, demand real-time operation. The major electronics manufacturers have invested heavily in DSP technology. Because they now find application in mass-market products, DSP chips account for a substantial proportion of the world market for electronic devices. Sales amount to billions of dollars annually, and seem likely to continue to increase rapidly.

A compression program is used to convert a data into a format compatible for compactness, and an uncompression program converts these compressed data back into a usable form. It can be a replication of the original or not depending on whether it is a lossy compression or a lossless compression. A lossy compression is a type of compression that allows data degradation. A lossless compression on the other hand, refers to the restored data that are identical to the original.