The next-generation VP9 and HEVC codecs are the latest incremental refinements of a basic codec design that dates back 25 years to h.261. This conservative, linear development strategy evolving a proven design has yielded reliable improvement with relatively low risk, but the law of diminishing returns is setting in. Recent performance increases are coming at exponentially increasing computational cost.
Daala tries for a larger leap forwardó by first leaping sidewaysó to a new codec design and numerous novel coding techniques. In addition to the technical freedom of starting fresh, this new design consciously avoids most of the patent thicket surrounding mainstream block-DCT-based codecs. At its very core, for example, Daala is based on lapped transforms, not the traditional DCT.
Read the full thing at http://people.xiph.org/~xiphmont/demo/daala/demo1.shtml