A program or a device capable of performing encoding and decoding on a digital data stream or signal is known as Codec. The stream or signal for transmission, storage or encryption are encoded and decoded by the Codecs. In the video camera, the ADC converts its analogue signals to digital signals, which after passing through the video compressor for transmission or storage are decoded by the DAC for analog display. An audio compressor converts analogue audio signals to digital signals for transmission or storage. The de-compressor at the receiving end converts the digital signals back to analog for playback. Essence is a term commonly associated with the raw encoded form of audio and video data.

Codec is an algorithm used to code and decode the voice conversation in case of VoIP. The voice and sound that we hear is in analogue form and needs to be converted into a digital form for transmission over Internet. On the other side, it needs to be decoded once again to make it easy to hear for the recipient. The coding and decoding can be done in different ways by utilizing compression to reduce the bandwidth of the conversation. It is pertinent to mention that with VoIP, encoding with heavy compression takes more time and delays the conversation. It is here that the codec becomes eminent for it not only maintains good quality with compression but also does the encoding and decoding in a reasonable time.