How does the Lucas Kanade algorithm work?
It works by trying to guess in which direction an object has moved so that local changes in intensity can be explained. Assume that we watch a scene through a square hole. The intensity a visible through the hole is variable. In the next frame the intensity of the pixel has increased to b.
Does video stabilization reduce quality?
Digital stabilization often leads to visual quality degradations because image sensors are not fully used due to employed motion compensation. Basically, resulting video comprising of steady frames is captured using a smaller sensor area; thus reducing its resolution.