Arithmetic coding is an entropy encoding technique that maps a sequence of symbols to a numeric interval between 0 and 1. Each symbol maps to a sub-interval of the current interval based on the symbol probabilities. As symbols are processed, the interval boundaries are updated according to the cumulative distribution function of the symbol probabilities. Arithmetic coding achieves better compression than Huffman coding by allowing coding of variable-length blocks without pre-specifying code lengths. It also handles conditional probability models more efficiently by updating interval boundaries based on context without needing pre-specified codebooks for all contexts.