System for encoding and decoding layered compressed video data

A dynamically configurable video signal processing system including an encoder and decoder processes data in the form of hierarchical layers. The system partitions data between hierarchical layers and allows variation in the number of layers employed. Data is automatically partitioned into one or more hierarchical layers as a function of one or more parameters selected from available system bandwidth, input data rate, and output signal quality. In addition, the image resolution and corresponding number of pixels per image of the data may be varied as a function of system parameters.