During the last decade, audio-visual communication has shaped the way humans interact with technical systems or other humans. During the next decade, haptic communication has the potential to further augment human-to-human and human-to-machine interaction. With recent advances in Virtual Reality, Man-Machine Interaction, Telerobotics, Telepresence, and Telemanipulation, the processing and communication of haptic signals are rapidly gaining in relevance and are becoming an enabling technology for many novel fields of application. The objective of this proposal is to investigate fundamental methods and technologies for the efficient processing and communication of haptic signals. We will develop a mathematical model of human haptic perception which will be instrumental in ensuring that introduced distortions stay below human perception thresholds. One of the main goals of this work is to leverage the model of human haptic perception for efficient lossy compression of haptic signal streams. We will study haptic signal processing and communication both from a theoretical point of view but also experimentally by designing, implementing and evaluating haptic interaction testbeds. The performance of the proposed haptic processing and communication methods will be analyzed both objectively and subjectively. With our work plan, we see the opportunity to establish a de facto standard for future haptic data communication.