Lossy codecs try to find an approximate signal that sounds as close as possible, but is easier to compress. They drop parts of the signal entirely, or reduce their resolution, based on models of human hearing to identify the parts that are least likely to be noticeable if they are missing. E.g. not all frequencies can be heard equally well, so quality is dropped on the ones that are heard less clearly anyways. And loud signals on one frequency can make signals on another frequency or following quickly after harder to perceive.

Most such audio codecs are based to some degree on variants of fourier transforms, so this modification is done by dropping or reducing resolution of parts of the output.