A method of embedding auxiliary information into the digital representation of host data containing noise in the low-order bits. The method applies to digital data representing analog signals, for example digital images. The method reduces the error introduced by other methods that replace the low-order bits with auxiliary information. By a substantially reverse process, the embedded auxiliary data can be retrieved easily by an authorized user through use of a digital key. The modular error embedding method includes a process to permute the order in which the host data values are processed. The method doubles the amount of auxiliary information that can be added to host data values, in comparison with bit-replacement methods for high bit-rate coding. The invention preserves human perception of the meaning and content of the host data, permitting the addition of auxiliary data in the amount of 50% or greater of the original host data.