Lempel Ziv encoding is an example of class of algorithms called      
   dictionary-based encoding. The idea is to create a dictionary of   
   strings and based on index value we encode the sequence. In case   
   both the sender and receiver have a copy of the dictionary, then     
   previously-encountered strings can be substituted by their index in 
   the dictionary to reduce the amount of information transmitted.

   In MTF encoding is done as alphabets appear in the   
   symbol table and there is no concept of substitution in case of  
   previously-encountered string. We just move the current char to front of
   the symbol table as discussed earlier.

  Code for Lempel-Ziv below would make things much easier :

dict_size = 256
dictionary = dict((chr(i), chr(i)) for i in xrange(dict_size))


w = ""
result = []
for c in uncompressed:
    wc = w + c
    if wc in dictionary:
        w = wc
    else:
        result.append(dictionary[w])
        
        dictionary[wc] = dict_size
        dict_size += 1
        w = c


if w:
    result.append(dictionary[w])
return result