GEEK ALERT!
The Unisys patent on the LZW compression scheme expires in about 15 minutes from this time of this posting. So I might as well have a pointer to a nice article describing the algorithm.
This software patent was one of the first that changed the software world as we know it. Folks had started using GIF, TIFF and ‘compress’ quite a bit to get their work done and to publish these new things called “web-pages”. Then all of the sudden Unisys realized that they actually owned a patent for the technique (originally developed to compress modem communications for British Telecom). So they started asking money from every developer who ever put LZW into their software. It even contributed to the birth of the new idea of basing business models on intellectual property. Some people got upset, accused them of extracting GIF-taxes, other folks paid up and others refused… leading to the endorsement of the PNG format, but it never really was as successful or popular as GIF.