1. A method of discriminating noise from content when compressing digital video data, comprising: computing a motion compensated difference frame from current image data and a reference frame; applying an orthogonal transform to the motion compensated difference frame in a pixel domain to obtain a transformed motion compensated difference frame having transform coefficients in a frequency domain, the transform coefficients including a DC component and AC components of a candidate block, the DC component having no frequency content and the AC components having frequency content; selecting a region of the transformed motion compensated difference frame, the selected region including a candidate block and a plurality of neighboring blocks; comparing, in the frequency domain, at least one component of the transform coefficients of the candidate block within the selected region of the transformed motion compensated difference frame to a threshold value to discriminate between content and noise; determining whether any of the plurality of neighboring blocks surrounding the candidate block have content or noise; and encoding the candidate block only if content is detected in the candidate block or in any of the plurality of neighboring blocks.