Ray Solomonoff defined an inference system that will learn to correctly predict any computable sequence with only the absolute minimum amount of data. This system, in a certain sense, is the perfect universal prediction algorithm. To summarize it very informally, Solomonoff induction works by:
Weighting hypotheses by simplicity, the system automatically incorporates a form of Occam's razor, which is why it has been playfully referred to as Solomonoff's lightsaber.
Solomonoff induction gets off the ground with a solution to the "problem of the priors". Suppose that you stand before a universal prefix Turing machine U. You are interested in a certain finite output string y0. In particular, you want to know the probability that U will produce the output y0 given a random input tape. This probability is the Solomonoff a priori probability of y0....