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Video compression is getting more and more important in the electronic world with increased amount of bandwidth and storage requirement due to increase in the video usage over the internet. Pioneering advances in the video compression algorithms is important. In the various video coding standards like: MPEG-1, MPEG-2, MPEG-4, blocks of image samples or residual data are compressed using a block based transform (such as the DCT) followed by quantization and entropy encoding. There is limited scope for improved compression performance in the later stages of encoding, since the operation of the DCT and the codebook for entropy coding is specified by the relevant coding standard. However, there is a scope for significant performance improvement in the design of the first stage of CODEC (motion estimation and compensation). Efficient motion estimation reduces the energy in the motion compensated residual frame and can dramatically improve compression performance.