This proposal will (1) investigate the applicability of the wavelet transform, in particular, a recently developed decomposition procedure based on a stochastic wavelet transform and a spectral factorization theorem, in the design of efficient and high quality data compression algorithms for use with wide-sense stationary random processes; and (2) to develop a non-stationary theory for the wavelet transform, and apply this to efficiently encode non- stationary random processes including transient pulse processes, cyclostationary processes, and asymptotic mean stationary processes.