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Smart cameras are expected to be important components for creating ubiquitous multimedia environments. In this paper, we propose a scheme for on-line semantic transcoding of the video captured by the smart camera. The transcoding process selects frames of importance and regions of interest for use by other processing elements in a ubiquitous computing environment. We have proposed a local associative computation based change detection scheme for identifying frames of interest. The algorithm also segments out the region of change. The computation is structured for easy implementation in DSP based embedded environment. The transcoding scheme enables the camera to communicate only regions of change in frames of interest to a server or a peer. Consequently communication and processing overhead reduces in a networked application environment. Experimental results have established effectiveness of the transcoding scheme.