PHOTZIP: A Lossy FITS Image Compression Algorithm that Protects   User-Defined Levels of Photometric Integrity
  A lossy compression algorithm is presented for astronomical images that protects photometric integrity for detected point sources at a user-defined level of statistical tolerance. PHOTZIP works by modeling, smoothing, and then compressing the astronomical background behind self-detected point sources, while completely preserving values in and around those sources. The algorithm also guaranties a maximum absolute difference (in terms of $\sigma$) between each compressed and original background pixel, allowing users to control quality and lossiness. For present purposes, PHOTZIP has been tailored to FITS format and is freely available over the web. PHOTOZIP has been tested over a broad range of astronomical imagery and is in routine use by the Night Sky Live (NSL) project for compression of all-sky FITS images. Compression factors depend on source densities, but for the canonical NSL implementation, a PHOTZIP (and subsequently GZIP or BZIP2) compressed file is typically 20% of its uncompressed size. 
Lior Shamir and Robert J. Nemiroff