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Lossless compression is a compression methodology in which the result of the compression can be restored faithfully, i.e. bit-by-bit identical with the uncompressed data.

In a nutshell, it is somewhat like compressing a Waveform file with ZIP or RAR.

The difference between 'mere' ZIP/RAR is that lossless compression algorithms are especially tuned and designed for the characteristics of Waveform data, thus achieving compression far greater than can be achieved by generic compression utilities.

As lossless compression preserves all information of the original Waveform file, audio compressed with lossless compression will unavoidably be larger than audio compressed with lossy compression. However, this disadvantage is more than offset by lossless' ability to be transcoded to other lossless format without any quality degradation.

A comparison between the different lossless codecs can be found here: http://wiki.hydrogenaudio.org/index.php?title=Lossless_comparison