Yes, it is in your brain. But if you think that your visual cortex receives anything akin to a high fidelity "picture", then you are mistaken. Regarding lossy image compression, you're free to look at something briefly and try to redraw it from scratch. Even if your drawing skills are perfect, you will find that your picture will be filled with confabulations and stereotypes.
> Because of a limited number of axons in the optic nerves (approximately 1 million axons in each) only ~6x10^6 bits/sec leave the retina and only 10^4 make it to layer IV of V1 [22,23]. These data clearly leave the impression that visual cortex receives an impoverished representation of the world, a subject of more than passing interest to those interested in the processing of visual information [24]. Parenthetically, it should be noted that estimates of the bandwidth of conscious awareness itself (i.e. what we ‘see’) are in the range of 100 bits/sec or less [22,23]
Considering the optic nerve can only tramsit ~6 Mbits/sec, and layer 4 of v1 in your visual cortext only gets ~10 kbits/sec, I would say you are wrong.
To test this, try seeing if you can distinguish HD from SD without the use of your fovea. You have one highly detailed section of your eye, and the rest is low quality input which is "upgraded" through previous sightings with the fovea and your brains knowledge of how it thinks the world works.
I would argue that you're confusing "brain receiving complete information" with "brain doing inference on what information it does receive to get you close enough". You don't need the full screen to tell that the image is SD vs HD, you just need to glance at a small segment. That's not 100s of mb/sec. You know that the rest of the video is happening in your peripheral, and maybe you can tell what's going on. But in actuality you're receiving a very low bit rate version of that, and your brain is simply telling you "X & Y are happening in HD in your peripheral" and it's convincing enough.
I've been tackling this from a different PoV (see recent comments) of audio bitrate sensing (20 Hz is the beat/tone boundary, where beats become tones, corresponding to about 0.2 MB/day of data acquisition), or of speaking and reading rates.
At 100 words/min spoken speech, humans can transmit about 1.1 MB/day sustained (24 hours without interruption).
At 600 words/min reading rate (a very high rate, roughly double the college-educated adult average), a human can absorb a maximum of less than 7 MB/day.
If you think that the information transferred by human speech consists only of the words spoken, you have a rather shallow view of language. You're also processing information taken from pace, pitch, timbre, intonation, volume, timing and direction (among other things). The written word is to speech what choreographic notation is to dance - it's enough to give you the gist, but you wouldn't mistake it for the real thing.
Each beat is probably better considered a symbol, so by your analysis the human audio channel is around 20 baud not 20 bits/s. The symbol size obviously has a large impact on the information bit rate.
We can estimate the size of a symbol though:
13b for primary tones(20khz range at about 3Hz resolution) + 4b for rising/falling/etc tonal patterns + 7b for volume (1dB detection over 120db range) + (42 phonemes in english so round up to 256 for convenience) 8b for phoneme patterns + 2 ears preprocessed for 2d directions is maybe 4b direction and 4b distance gives a total of around 40b per symbol.
So with that wild approximation, it's at 800 bps, or 8.64 MB / 24h
A fair argument, and yes, that expands the channel somewhat.
(My first posts on seeing this concept, elsewhere, had confused bits and bytes, so I ended up with 1.7 MB rather than 0.2 MB.)
But the point remains that that what we're discussing is almost certainly a maximum upper bound on human conscious information processing capacity. And that the values are ... pretty limited, relative to the amounts of information our machines can fling at us.
8.6 MB/day means that on average we're looking at 2/3 of that for waking hours or 5.7 MB. If you spend half your waking hours at work, that's about 2.9 MB of information acquired per day at work, max, over audio track.
And that's the tail-end of a 3.5 billion year R&D effort.
Somebody should tell the lossy video compression folks.