Lossless encoding is a method of data compression that allows the original data to be perfectly reconstructed from the compressed data. This means that no information is lost during the compression process, making it ideal for applications where quality is crucial, such as in audio files, images, and text documents. Common formats that use lossless encoding include FLAC for audio, PNG for images, and ZIP for general file compression. These formats ensure that the decompressed data is identical to the original, preserving all details and quality, which is essential for professional use and archiving.