In this dissertation, first, we have proposed and implemented a new perceptually tuned wavelet based, rate scalable, and color image encoding/decoding system based on the human perceptual model. It is based on state-of-the-art research on embedded wavelet image compression technique, Contrast Sensitivity Function (CSF) for Human Visual System (HVS) and extends this scheme to handle optimal bit allocation among multiple bands, such as Y, Cb, and Cr. Our experimental image codec shows very exciting results in compression performance and visual quality comparing to the new wavelet based international still image compression standard - JPEG 2000. On the other hand, our codec also shows significant better speed performance and comparable visual quality in comparison to the best codec available in rate scalable color image compression - CSPIHT that is based on Set Partition In Hierarchical Tree (SPIHT) and Karhunen-Loeve Transform (KLT). Secondly, a novel wavelet based interframe compression scheme has been developed and put into practice. It is based on the Flexible Block Wavelet Transform (FBWT) that we have developed. FBWT based interframe compression is very efficient in both compression and speed performance. The compression performance of our video codec is compared with H263+. At the same bit rate, our encoder, being comparable to the H263+ scheme, with a slightly lower (Peak Signal Noise Ratio (PSNR) value, produces a more visually pleasing result. This implementation also preserves scalability of wavelet embedded coding technique. Thirdly, the scheme to handle optimal bit allocation among color bands for still imagery has been modified and extended to accommodate the spatial-temporal sensitivity of the HVS model. The bit allocation among color bands based on Kelly's spatio-temporal CSF model is designed to achieve the perceptual optimum for human eyes. A perceptually tuned, wavelet based, rate scalable video encoding/decoding system has been designed and implemented based on this new bit allocation scheme. Finally to present the potential applications of our rate scalable video codec, a prototype system for rate scalable video streaming over the Internet has been designed and implemented to deal with the bandwidth unpredictability of the Internet.