An example of dictionary compression that is based on a dynamically encoded dictionary that replaces a continuous stream of characters with codes. The symbols represented by the codes are stored in memory. The relationship between the code and the symbol varies with the data, so this approach to data compression is more responsive to data variation. As the data varies, the dictionary adapts to the traffic. Small dictionaries of 2000-32000 bytes are typical; however, compression ratios can be optimized by the use of a larger dictionary.

Variations of this particular algorithm are used in Stac (LZS), ZIP, and the unix compress utility.