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Originally Posted by bob_builder
No, it just requests that video stream is rewound or paused and requests the play is started again from the point when play is pressed in much the same way as a Real Video stream works on the internet.
What you are thinking about is a PVR, which records live TV broadcasts on a hard drive.
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When a movie is loaded on to a VOD server for the first time, "trick-play" files are generated. One is just an MPEG of your movie being played fast-forward at 6-7x speed, and another is an MPEG of your movie going backwards. These files, and the main movie file, are all cross-indexed together with respect to time.
When you REW or FF, the server stops playing out the main movie, and switches to playing out the appropriate trick play file, from the appropriate index point.
This saves a huge amount of CPU load on the server, freeing up more capacity for normal playback: generating the FF/REW image on the fly is a fairly expensive process.