Video of visual acuity (VA) and contrast sensitivity (CS) test charts in a complex background was recorded using a CCD color camera mounted on a computer-controlled tripod and was fed into real-time MPEG-2 compression/decompression equipment. The test charts were based on the triangle orientation discrimination (TOD) test method and contained triangle test patterns of different sizes and contrasts in four possible orientations. In a perception experiment, observers judged the orientation of the triangles in order to determine VA and CS thresholds at the 75% correct level. Three camera velocities (0, 1.0, and 2.0 deg/s, or 0, 4.1, and 8.1 pixels/frame) and four compression rates (no compression, 4 Mb/s, 2 Mb/s, and 1 Mb/s) were used. VA is shown to be rather robust to any combination of motion and compression. CS, however, dramatically decreases when motion is combined with high compression ratios. The measured thresholds were fed into the TOD target acquisition model to predict the effect of motion and compression on acquisition ranges for tactical military vehicles. The effect of compression on static performance is limited but strong with motion video. The data suggest that with the MPEG2 algorithm, the emphasis is on the preservation of image detail at the cost of contrast loss.