estimation: find the best match
compensation: the selected best matching region in the reference frame is subtracted from the current region.
Different motion compensation block sizes can be used such as 16x16, 8x8, 4x4 ... Small block sizes produce better motion compensation results. However, it also leads to increase complexity (more search operations, more vectors to be transmitted, requires more bit). An effective method is to adapt the block size, as H.264 does (Tree structured motion compensation, MPEG4 uses 16x16 and 8x8)