In a general predictive coding scheme, the correlation between the neighboring pixel values is used to form a prediction for each pixel. By far, the most common approach to predictive coding is differential pulse code modulation (DPCM). In DPCM, the prediction is subtracted from the actual pixel value to form a differential image that is much less correlated than the original image data. The differential image is then quantized and encoded. The quantization process determines the resulting bit rate and image quality. We now discuss the components of a lossy DPCM scheme in more detail.