Short for Lempel-Zif-Welch, a popular data compression technique developed in 1977 by J. Ziv and A Lempel, and later refined by Terry Welch. It is the compression algorithm used in the GIF graphics file format, which is one of the standard graphic formats used by CompuServe and the World Wide Web.
The patent for LZW is owned by Unisys, which for many years allowed anyone to use the algorithm for free. Then in 1995, Unisys suddenly decided to charge a license fee. There was an uproar from the Compuserve and Web communities, and Unisys backed down somewhat, though they still enforce the licensing requirement for commercial applications.