Arithmetic coding is a form of entropy encoding used in lossless data compression. Normally, a string of characters such as the words "hello there" is represented using a fixed number of bits per character, as in the ASCII code. When a string is converted to arithmetic encoding, frequently used characters will be stored with fewer bits and not-so-frequently occurring characters will be stored with more bits, resulting in fewer bits used in total. Arithmetic coding differs from other forms of entropy encoding, such as Huffman coding, in that rather than separating the input into component symbols and replacing each with a code, arithmetic coding encodes the entire message into a single number, an arbitrary-precision fraction n where [0.0 ≤ n < 1.0). It represents the current information as a range, defined by two numbers. Recent Asymmetric Numeral Systems family of entropy coders allows for faster implementations thanks to directly operating on a single natural number representing the current information.
In the simplest case, the probability of each symbol occurring is equal. For example, consider a set of three symbols, A, B, and C, each equally likely to occur. Simple block encoding would require 2 bits per symbol, which is wasteful: one of the bit variations is never used. That is to say, A=00, B=01, and C=10, but 11 is unused.
A more efficient solution is to represent a sequence of these three symbols as a rational number in base 3 where each digit represents a symbol. For example, the sequence "ABBCAB" could become 0.0112013 (in arithmetic coding the numbers are between 0 and 1). The next step is to encode this ternary number using a fixed-point binary number of sufficient precision to recover it, such as 0.00101100102 — this is only 10 bits; 2 bits are saved in comparison with naïve block encoding. This is feasible for long sequences because there are efficient, in-place algorithms for converting the base of arbitrarily precise numbers.
To decode the value, knowing the original string had length 6, one can simply convert back to base 3, round to 6 digits, and recover the string.