Quantization, involved in image processing, is a lossy compression technique achieved by compressing a range of values to a single quantum (discrete) value. When the number of discrete symbols in a given stream is reduced, the stream becomes more compressible. For example, reducing the number of colors required to represent a digital image makes it possible to reduce its file size. Specific applications include DCT data quantization in JPEG and DWT data quantization in JPEG 2000.

Color quantization reduces the number of colors used in an image; this is important for displaying images on devices that support a limited number of colors and for efficiently compressing certain kinds of images. Most bitmap editors and many operating systems have built-in support for color quantization. Popular modern color quantization algorithms include the nearest color algorithm (for fixed palettes), the median cut algorithm, and an algorithm based on octrees.

It is common to combine color quantization with dithering to create an impression of a larger number of colors and eliminate banding artifacts.

Grayscale quantization, also known as gray level quantization, is a process in digital image processing that involves reducing the number of unique intensity levels (shades of gray) in an image while preserving its essential visual information. This technique is commonly used for simplifying images, reducing storage requirements, and facilitating processing operations. In grayscale quantization, an image with N intensity levels is converted into an image with a reduced number of levels, typically L levels, where L<N. The process involves mapping each pixel's original intensity value to one of the new intensity levels. One of the simplest methods of grayscale quantization is uniform quantization, where the intensity range is divided into equal intervals, and each interval is represented by a single intensity value. Let's say we have an image with intensity levels ranging from 0 to 255 (8-bit grayscale). If we want to quantize it to 4 levels, the intervals would be [0-63], [64-127], [128-191], and [192-255]. Each interval would be represented by the midpoint intensity value, resulting in intensity levels of 31, 95, 159, and 223 respectively.

The formula for uniform quantization is:

${\displaystyle Q(x)=\left\lfloor {\frac {x}{\Delta }}\right\rfloor \times \Delta +{\frac {\Delta }{2}}}$ Where:

Let's quantize an original intensity value of 147 to 3 intensity levels.

Original intensity value: x=147