The term Codec is short for Coder-Decoder. In digital media, it is a program that can either encode or decode a data stream (or even both). For decoding multiple media formats, users often download codec packs that contain many programs for playing back a wide range of downloaded videos and audio files of differing formats.
In digital music there are two categories of codec used for audio files. These are lossy and lossless. An example of a lossy audio codec is the Lame encoder which is used to convert audio data into the MP3 format. An example of a lossless codec is FLAC which produces audio files that are identical to the original.