Applications
Arithmetic coding can be viewed as a generalization of Huffman coding, in the sense that they produce the same output when every symbol has a probability of the form 1/2k; in particular it tends to offer significantly better compression for small alphabet sizes. Huffman coding nevertheless remains in wide use because of its simplicity and high speed. Intuitively, arithmetic coding can offer better compression than Huffman coding because its "code words" can have effectively non-integer bit lengths, whereas code words in Huffman coding can only have an integer number of bits. Therefore, there is an inefficiency in Huffman coding where a code word of length k only optimally matches a symbol of probability 1/2k and other probabilities are not represented as optimally; whereas the code word length in arithmetic coding can be made to exactly match the true probability of the symbol.
Huffman coding today is often used as a "back-end" to some other compression methods. DEFLATE (PKZIP's algorithm) and multimedia codecs such as JPEG and MP3 have a front-end model and quantization followed by Huffman coding (or variable-length prefix-free codes with a similar structure, although perhaps not necessarily designed by using Huffman's algorithm).
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