
After further research, I have found that lossless data compression allows the original data to be compressed and reconstructed the exact same, whereas lossy compression only allows an approximation of the original data to be reconstructed. A lossy compression technique can reduce the space needed by a greater amount than lossless compression, however only certain types of data (i.e. graphics, audio, and video) can tolerate lossy compression. Data and programs must be compressed with the lossless technique. In a scanned photograph, the sky is many different pixels of blue, but in lossy compression, the program picks one color of blue to be used for every pixel.
If you are still confused, or desire further information on the topic, I found http://computer.howstuffworks.com/file-compression3.htm extremely helpful.
References:
http://www.webopedia.com/TERM/L/lossless_compression.html
http://en.wikipedia.org/wiki/Lossless_data_compression


