1. One or more computer-readable media containing computer-executable instructions which, when executed by a computer, cause the computer to perform a method for decoding an alpha image encoded in a bit stream, the method comprising: entropy decoding encoded data from the bit stream to produce differential residual data for the image, the differential residual data encoded in a modulo domain; differential decoding the residual data to produce quantized data for the alpha transparency image, the quantized data represented in a continuous domain; and dequantizing the quantized data from the continuous domain to produce reconstructed data for the alpha image such that a quantized data value representing a full encoded alpha image value is dequantized to result in a full reconstructed alpha image value.