The traditional system of binary encoding for decimal digits, known as binary-coded decimal (BCD), uses four bits to encode each digit, resulting in significant wastage of binary data bandwidth (since four bits can store 16 states and are being used to store only 10), even when using packed BCD.
Densely packed decimal is a more efficient code that packs three digits into ten bits using a scheme that allows compression from, or expansion to, BCD with only two or three hardware gate delays.
[1] The densely packed decimal encoding is a refinement of Chen–Ho encoding; it gives the same compression and speed advantages, but the particular arrangement of bits used confers additional advantages: In 1969, Theodore M. Hertz, and in 1971, Tien Chi Chen (陳天機) with Irving Tze Ho (何宜慈) devised lossless prefix codes (referred to as Hertz and Chen–Ho encodings[2]) which packed three decimal digits into ten binary bits using a scheme which allowed compression from or expansion to BCD with only two or three gate delays in hardware.
The table shows how, on decoding, the ten bits of the coded form in columns b9 through b0 are copied into the three digits d2 through d0, and the remaining bits are filled in with constant zeros or ones.
Bits b8 and b9 are not needed and ignored when decoding DPD groups with three large digits (marked as "x" in the last row of the table above), but are filled with zeros when encoding.