A digital observation system and method for processing and transmitting video data between a video camera, or video cameras, and a base unit. The video data is transmitted, for example, by a communication protocol that is compliant with Ethernet physical drivers for transmitting and receiving data at around 100 Mbps. Video is captured at a sensor in the video camera, digitally processed and transmitted, thus overcoming limitations associated with analog processing and allowing unique features to be added. Images and other data may be transmitted efficiently in their native format, with reduced overhead, and in a non-compressed format due to the data transmission rate at or below 100 Mbps.