A compression encoder receives data words and stores at least part of the most recently received ones in a memory. Newly received data words are compared with the at least parts of data words in the memory, where the similarity between the data words falls within a predetermined threshold they are deemed to match. If such a match condition occurs the compression encoder outputs data indicating the stored data word that the new data word matches and data defining the difference between them. The threshold parameter which is used in the comparison of the data words is varied in dependence upon the data received. The threshold may be a number of identical bits or a numerical difference between the data words.
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