A Lossy Method for Compressing Raw CCD Images
  This paper describes a lossy method for compressing raw images produced by CCDs or similar devices. The method is very simple: lossy quantization followed by lossless compression using general-purpose compression tools such as gzip and bzip2. A key feature of the method is that compressed images can be converted to FITS files simply by decompressing with gunzip or bunzip2, and this is a significant advantage for distributing compressed files. The degree of quantization is chosen to eliminate low-order bits that over-sample the noise, contain no information, and are difficult or impossible to compress. The method is lossy but gives guarantees on the maximum absolute difference, the expected mean difference, and the expected RMS difference between the compressed and original images; these guarantees make it suitable for use on raw images. The method consistently compresses images to roughly 1/5 of their original size with a quantization such that no value changes by more than 1/2 of a standard deviation in the background. This is a dramatic improvement on lossless compression. It appears that bzip2 compresses the quantized images to within a few tens of percent of the theoretical limit. 
Alan M. Watson