The term Codec is derived from the words coder and decoder, and refers to software designed to encode digital audio and video data into an efficient, compressed format, and then to decompress it for playback.
Many different codecs exist for various purposes. Some codecs create extremely small file sizes but require a high degree of computing power to decode them for playback. Other codecs playback easily at the expense of greater file sizes. There are also both lossy and lossless codec compression schemes.