Image compression is one of the tedious tasks in the field of image transmission via internet and to store in binary or digital form on computers and other storage devices. The necessity of bandwidth of channel relies on many aspects like data and size of file to be transferred. Compressing an image is significantly different than compressing raw binary data. If we used general or outdated technique to compression images then result would be not optimal as it should be. This is because images have definitely statistical properties which can be triggered or exploited by encoders which are implemented or design for them. In image we have to give up some fine details for the sake of saving a little more bandwidth or storage space. So we can say that lossy compression technology. In this dissertation compression of digital images are done with the help of DCT. Several encoding technique have also been used together with DCT to improve the performance of compression. A computational analysis of picture quality is also made with respect to compression ratio and PSNR.