A system and method are described below for encoding interactive low-latency video using interframe coding. For example, one embodiment of a computer-implemented method for performing video compression comprises: logically subdividing each of a sequence of images into a plurality of tiles, each of the tiles having a defined position within each of the sequence of images, the defined position remaining the same between successive images; encoding one of the tiles at a first defined position in a first image of the sequence of images using a first compression format and encoding the reminder of the tiles in the first image using the second compression format; and encoding one of the tiles at a second defined position in a second image of the sequence of images using the first compression format and encoding the reminder of the tiles in the first image using the second compression format; wherein the second compression format is dependent on previously-encoded tiles encoded according to the first compression format and/or the second compression format.