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This paper reviews recent advances in using B pictures in the context of the draft H.264/AVC video-compression standard. We focus on reference picture selection and linearly combined motion-compensated prediction signals. We show that bidirectional prediction exploits partially the efficiency of combined prediction signals whereas multihypothesis prediction allows a more general form of B pictures. The general concept of linearly combined prediction signals chosen from an arbitrary set of reference pictures improves the H.264/AVC test model TML-9 which is used in the following. We outline H.264/AVC macroblock prediction modes for B pictures, classify them into four groups and compare their efficiency in terms of rate-distortion performance. When investigating multihypothesis prediction, we show that bidirectional prediction is a special case of this concept. Multihypothesis prediction allows also two combined forward prediction signals. Experimental results show that this case is also advantageous in terms of compression efficiency. The draft H.264/AVC video-compression standard offers improved entropy coding by context-based adaptive binary arithmetic coding. Simulations show that the gains by multihypothesis prediction and arithmetic coding are additive. B pictures establish an enhancement layer and are predicted from reference pictures that are provided by the base layer. The quality of the base layer influences the rate-distortion trade-off for B pictures. We demonstrate how the quality of the B pictures should be reduced to improve the overall rate-distortion performance of the scalable representation.