1. A method of processing a digital video sequence, the method comprising: estimating compensated motion parameters and compensated distortion parameters (compensated M/D parameters) of a compensated motion/distortion (M/D) affine transformation for a block of pixels in the digital video sequence; and applying the compensated M/D affine transformation to the block of pixels using the estimated compensated M/D parameters to generate an output block of pixels, wherein translational and rotational jitter in the block of pixels is stabilized in the output block of pixels and distortion due to skew, horizontal scaling, vertical scaling, and wobble in the block of pixels is reduced in the output block of pixels, wherein the compensated M/D affine transformation is defined as [ x ′ y ′ ] = [ 1 + s x c - θ c + k c θ c 1 + s y c ] ⁡ [ x y ] + [ d x c d y c ] wherein d x c , d y c , and θ c are the compensated motion parameters, s x c , s y c , and k c are the compensated distortion parameters, [ x ′ y ′ ] are coordinates of a pixel in the block of pixels, and [ x y ] are coordinates of a pixel in the output block of pixels.