Hierarchical coding techniques, also referred to as layered or sub-band coding, split a continuous media signal into components of varying importance[24][25]. The original signal may be reconstructed by aggregating all these components, but even proper but specific subsets of these components can approximate it well. A simple form of hierarchical encoding may decompose a video frame into a low resolution component containing one quarter of the pixels and a high resolution component containing the remaining ones. A receiver that only chooses to (or has to) use a presentation window one quarter of the sender's size, may avoid using for the high resolution component, and can reduce its resource needs by discarding it or, even better, by not receiving it. Thus, with hierarchically encoded streams, the receivers can allocate resources based on their own specifications and priorities. For long term allocations, this may be done in advance so that the sender can avoid sending the extraneous streams. Temporary resource shortages, whether memory or processing ones, can be dealt with by ignoring some streams, without any explicit negotiations with the sender, and dynamically degrading the quality of the presented signal. The receiver may even manipulate these streams before presentation in ways not anticipated by the sender[26].
Hierarchical encoding can be exploited to the benefit of the network infrastructure itself. For high speed networks, such as ATM, significant congestion control problems may arise due to the statistical multiplexing of very high burstiness signals[21][22]. A solution that avoids reserving resources at the peak transmission rates can be based on shedding load quickly by dropping some traffic without causing an avalanche of retransmissions[27]. With hierarchically coded continuous media, the less important signal components, as determined by the applications, can be dropped to relieve congestion without causing retransmissions, leading to degradations in quality of service but not service interruption. Many proposed congestion control techniques rely on this feature[22][27] as a last resort. Another relevant aspect of hierarchical encoding is that in some schemes the basic, low resolution, layers that are essential for signal continuity are highly compressible, thus suggesting a strategy of transmitting these streams with stricter guarantees than the ones for the remaining streams.
The benefits derived from the independent streams provided by hierarchical encoding should be measured against two factors. First, separate compression of parts of the signals can be less efficient than compression of the complete signal. More importantly, there are costs involved with splitting the signal into components and later reconstructing it, since not only hardware and software support is still inadequate for this purpose, but there may also be added performance penalties for not conforming to standardized encoding formats. Since some international compression standards, such as JPEG[28] support hierarchical coding, this problem may be of less importance in the future as vendors are pressed to upgrade their system software.