16. The compression engine of claim 14, wherein said binary sequences are of a fixed length of K bits, where K is greater than or equal to log.sub.2 M.
14. A compression engine, for compressing M-ary symbols, each representing a pixel value in a palettized image and selected from an alphabet of M symbols, into codewords which are represented in fewer bits and from which the M-ary symbols can be extracted, the compression engine comprising: means for determining a distribution of symbols in said input stream; a reindex table generator which determines a binarization for each of the M possible symbols, said binarization is based on a distribution of the M-ary symbols, wherein said binarization is represented by a reindex table; reindexing means for binarizing each M-ary symbol into a binary sequence according to said reindex table, thereby transforming the M-ary symbols representing the palettized image into a binary bit stream; a binary entropy encoding compressor which compresses said binary bit stream and outputs a resulting codeword stream, wherein said binarization is selected to minimize the bitwise entropy of the binarized input stream.