Dual-mode compression of images/videos for reliable real-time transmission includes a scalable block-based video compression. The method provides graceful quality degradations in case of channel bandwidth changes. Prediction for encoding is avoided, and the process is less complex with less memory requirements. The method involves processing each block independently with the advantage that errors are not able to propagate beyond current block boundaries. Two different encoding modes are used, natural image coding for acquired images and graphics coding for computer generated images. The proper encoding mode is chosen by comparing performance of the two modes for a particular block to be encoded. An embedded bitstream is generated by the encoder in accordance to the available channel bandwidth.