1. The DCT (II) packs lower frequency coefficients into the top-left corner of the block.
2. Quantization helps to zero out many higher frequency coefficients (toward bottom-right corner). This is where your information loss occurs.
3. Clever zig-zag scanning of the quantized coefficients means that you wind up with long runs of zeroes.
4. Zig-zag scanned blocks are RLE coded. This is the first form of actual compression.
5. RLE coded blocks are sent through huffman or arithmetic coding. This is the final form of actual compression (for intra-frame-only/JPEG considerations). Additional compression occurs in MPEG, et. al. with interframe techniques.