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Cryptography takes a file and transforms it, through a cryptographic algorithm, into a new file (usually of about the same size - although it may also pad it to bring it up to a standard size). This new file is known as cyphertext. The original file (also known as clear text) can be recovered from the cyphertext by application of the decryption algorithm. Usually the encryption requires some kind of "key" as part of the algorithm. If the same key is used to both encrypt and decrypt, it is known as "symmetric". If different keys are used to encrypt and decrypt, it is known as "asymmetric".

Steganography hides a file within another file. Usually this is done by making changes to the bytes of the file in a way that does not obviously change the file that is being used as the repository for the hidden file. An example would be to take a graphic file and change the bits in the file that indicate the color of the pixels in the graphic file. The binary "word" 0110 0111 could be hidden in the graphic file by leaving the color of the first pixel, incrementing the color of the second and third by one, leaving the next two unchanged, then incrementing the next 3 by one. Changing the colors by one leaves the picture in the graphic file looking unchanged - a change of 1 in the value of the color is imperceptible to the human eye. The hidden message could be recovered by subtracting the values from the unaltered picture from the picture that has the message hidden in it.

In the case of cryptography, the objective is to make the message unreadable to anyone who doesn't have the key and know the correct algorithm. In the case of steganography, the objective is to hide the existence of the message.

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