Are you referring to a Wireless Sensor Network? If so, i don't believe there is a "fixed" way of doing video compression in such a network. I also think that the usual video compression codecs (e.g. mpeg) and methods (reduce bitrate, framerate, codec options etc.) would come into play.
Yes it happens and its called wireless multimedia sensor network (WMSN). In this type of network video file must has to compressed before transmission. I want to know that which compression technique gives higher compression rate with good quality so that it can be used in WMSN.
The compression techniques discussed in the post like mpeg, H.26X are all very complex to be implemented on resource constrained WSN nodes. Suggested techniques in literature include Wyner-Ziv encoding which is a kind of DVC.