One embodiment of the present invention provides a method that facilitates compression of video data in a computer system by performing the time-consuming task of computing the difference between successive frames of video data independently from the central processing unit. This frees the often-overburdened central processing unit from performing this time-consuming compression operation and can thereby improve the handling of video data. Thus, one embodiment of the present invention can be characterized as a method for compressing video data in a computer system. This method includes receiving a stream of data from a current video frame in the computer system. It also includes computing a difference frame from the current video frame and a previous video frame "on-the-fly" as the current video frame streams into the computer system. The method additionally includes storing the difference frame in a memory in the computer system.