Process where a “wide” video image (typically in a 16:9 widescreen format) is compressed or squeezed horizontally to fit a more narrow video display standard but expands to full size when played over a wide video display.
Letterboxing an image enables the viewer to see the entire widescreen presentation of a movie as it was intended and as it was shown in the theater. However, in order to fit a “wide” image in a “narrow” television, the wide image must be centered in the screen with black bars above and below it (in order to fit a wide image in a narrow screen, the width must match the width of the narrow display so the height of the image is necessarily less than that of the more narrow and square video display). While this method allows the user to see the entire image as it was meant to be seen (narrow 4:3 aspect ratio television sets normally show pan & scan movies), the image loses some horizontal resolution to the black bars.
While not much can be done about this on standard 4:3 televisions, there are wider 16:9 displays, which can show an entire movie image with no bars thus allowing the picture to fill the screen. To take advantage of this, a movie can be distributed in a squeezed anamorphic format without black bars. On a more square 4:3 television this results in an image which seems tall and pinched with actors looking too narrow and objects distorted. However, when played on a widescreen display, the picture is stretched out to its proper width resulting in a widescreen image with no bars and the maximum possible resolution. This technique is being used primarily with DVDs to provide superior quality video to users of widescreen televisions. DVDs featuring this anamorphic version allow a user to watch the image in a letterboxed or pan & scan format on their traditional more square 4:3 televisions when this is selected while allowing users with widescreen televisions to enjoy the full benefit of their displays. AudioVideo101 - Ultimate Guide
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