Source : Free On-Line Dictionary of Computing

Lempel-Ziv Welch compression
     
        (LZW) The {algorithm} used by the {Unix} {compress} command to
        reduce the size of files, e.g. for archival or transmission.
        LZW was designed by Terry Welch in 1984 for implementation in
        hardware for high-performance disk controllers.  It is a
        variant of {LZ78}, one of the two {Lempel-Ziv compression}
        schemes.
     
        The LZW algorithm relies on reoccurrence of byte sequences
        (strings) in its input.  It maintains a table mapping input
        strings to their associated output codes.  The table initially
        contains mappings for all possible strings of length one.
        Input is taken one byte at a time to find the longest initial
        string present in the table.  The code for that string is
        output and then the string is extended with one more input
        byte, b.  A new entry is added to the table mapping the
        extended string to the next unused code (obtained by
        incrementing a counter).  The process repeats, starting from
        byte b.  The number of bits in an output code, and hence the
        maximum number of entries in the table is usually fixed and
        once this limit is reached, no more entries are added.
     
        LZW compression and decompression are licensed under {Unisys}
        Corporation's 1984 U.S. Patent 4,558,302 and equivalent
        foreign patents.  This kind of patent isn't legal in most
        coutries of the world (including the UK) except the USA.
        Patents in the UK can't describe {algorithm}s or mathematical
        methods.
     
        [A Technique for High Performance Data Compression, Terry A.
        Welch, IEEE Computer, 17(6), June 1984, pp. 8-19]
     
        [J. Ziv and A. Lempel, "A Universal Algorithm for Sequential
        Data Compression," IEEE Transactions on Information Theory,
        Vol. IT-23, No. 3, May 1977, pp. 337-343].