A method for processing an image, consisting of a foreground and a background, to produce a highly compressed and accurate representation of the image, including the steps of scanning the image to create a digital image of the image, comparing the digital image against a codebook of stored digital images; matching the digital image with one of the stored digital images of the codebook; producing an index code identifying the background of the stored digital image as having matched the digital image; subtracting the stored digital image from the digital image to produce a second digital image representing the foreground of the stored digital image; and storing the second digital image with the index code. An apparatus is also provided for compressing images having a foreground and a background, consisting of an image scanner, a template image storage device for storing background templates, a processor system for matching a scanned image of the image with one of the background templates, resulting in a template identifier, a processor system for compensating the scanned image for the matched template to produce a foreground image, and a data compression system for compressing the foreground image.