Lossy compression techniques permanently discard some data from the original file, resulting in degradation of quality. Lossless compression techniques allow for perfect reconstruction of the original data from the compressed file. The document asks questions about lossy vs lossless compression, applying Huffman encoding to a discrete source with 5 symbols having specified probabilities, drawing the Huffman tree, calculating the average code length and entropy of the source, and determining if the system is lossy or lossless.