A method of embedding auxiliary information into the digital representation of host data created by a lossy compression technique. The method applies to data compressed with lossy algorithms based on series expansion, quantization to a finite number of symbols, and entropy coding. Lossy compression methods represent the original data as integer indices having redundancy and uncertainty in value by one unit. Indices which are adjacent in value are manipulated to encode auxiliary data. By a substantially reverse process, the embedded auxiliary data can be retrieved easily by an authorized user. Lossy compression methods use loss-less compressions known also as entropy coding, to reduce to the final size the intermediate representation as indices. The efficiency of the compression entropy coding, known also as entropy coding is increased by manipulating the indices at the intermediate stage in the manner taught by the method.