Data compression compresses the blocks of data before storing them in the geodatabase. The compression can be lossy (JPEG and JPEG 2000) or lossless (LZ77 or JPEG 2000). Lossless compression means that the values of cells in the raster dataset are not changed or lost. You should choose lossless compression if the pixel values of the raster dataset will be used for analysis or deriving other data products.
LZ77 (the default) is a lossless compression that preserves all raster cell values. It uses the same compression algorithm as the PNG image format and is similar to ZIP compression. Because lossless compression retains all the pixel values, it can only compress raster data at a low file-size ratio (such as 2:1 or 3:1, depending on the data). Lossy compression, on the other hand, can compress raster datasets at a much higher ratio (such as 20:1); however, lossy compression does not retain the exact values of each pixel. Lossy compression is suitable for geographic information system (GIS) projects in which the raster dataset is simply a background image, but it is usually not suitable for raster analysis.
For JPEG and JPEG 2000 compression, the level of compression will depend on the data but can also be controlled by changing the compression quality; the compression quality value ranges from 1 to 100 for both JPEG and JPEG 2000. Choosing a higher value will result in less compression and a higher-quality image. Choosing a lower value will result in more compression but a lower-quality image. JPEG compression ratios can be as great as 10:1, and JPEG 2000 can be as great as 20:1. The more homogeneous the data, the higher the compression ratio. The lower the compression quality, the higher the compression ratio. Additionally, the JPEG (JFIF) compression algorithm can only be used with unsigned 8-bit raster data (single-band grayscale or three-band raster data). JPEG 2000 uses wavelet technology to compress rasters so they visually appear lossless, meaning that although the cell values do get manipulated, the differences between the original and the same raster with compression are not easily distinguishable.
When storing JPEG 2000 in a file or a file geodatabase, you can save the raster dataset using a lossless compression if you set the compression quality value to 100. This is not currently available for an ArcSDE geodatabase.