The process of distributing and exhibiting a motion picture has changed little since the Lumière brothers presented the first motion picture to an audience in 1895. While this analog photochemical process is capable of producing screen images of great beauty and expressive power, more often the consumer experience is diminished by third generation prints and by the wear and tear of the mechanical process. Furthermore, the film industry globally spends approximately $1B annually manufacturing and shipping prints. Alternatively, distributing digital files would theoretically yield great benefits in terms of image clarity and quality, lower cost, greater security, and more flexibility in the cinema (e.g., multiple language versions). In order to understand the components of the digital cinema chain and evaluate the proposed technical solutions, the Entertainment Technology Center at USC in 2000 established the Digital Cinema Laboratory as a critical viewing environment, with the highest quality film and digital projection equipment. The presentation describes the infrastructure of the Lab, test materials, and testing methodologies developed for compression evaluation, and lessons learned up to the present. In addition to compression, the Digital Cinema Laboratory plans to evaluate other components of the digital cinema process as well.