Lossless compression techniques, as their name implies, involve no loss of information. If data have been losslessly compressed, the original data can be recovered exactly from the compressed data after a compress/expand cycle. Lossless compression is generally used for so-called "discrete" data, such as database records, spreadsheets, word-processing files, and even some kinds of image and video information.

Text compression is a significant area for lossless compression. It is very important that the reconstruction is identical to the text original, as very small differences can result in statements with very different meanings. Consider the sentences "Do not send money" and "Do now send money." A similar argument holds for computer files and for certain types of data such as bank records.

Furthermore, if data of any kind are to be processed or "enhanced" later to yield more information, it is important that the integrity be preserved. For example, suppose we compressed a radiological image in a lossy fashion, and the difference between the reconstruction Y and the original X was visually undetectable. If this image was later enhanced, the previously undetectable differences may cause the appearance of anomalies that could potentially mislead the radiologist. Because the price for this kind of mishap may be a human life, it makes sense to be very careful about using a compression scheme that generates a reconstruction that is different from the original.