1. A method of performing mode selection in a video compression and encoding system, said method comprising: encoding and decoding with each possible encoding mode; computing a distortion value for each encoding mode wherein said distortion value reduces the effects of outliers; computing a bit rate value for each encoding mode; computing a Lagrangian value for each encoding mode using said distortion value, said bit rate value, and a Lagrangian multiplier; and selecting an encoding mode using said Lagrangian values.