  Decoherence and loss will limit the practicality of quantum cryptography and
computing unless successful error correction techniques are developed. To this
end, we have discovered a new scheme for perfectly detecting and rejecting the
error caused by loss (amplitude damping to a reservoir at T=0), based on using
a dual-rail representation of a quantum bit. This is possible because (1)
balanced loss does not perform a ``which-path'' measurement in an
interferometer, and (2) balanced quantum nondemolition measurement of the
``total'' photon number can be used to detect loss-induced quantum jumps
without disturbing the quantum coherence essential to the quantum bit. Our
results are immediately applicable to optical quantum computers using single
photonics devices.
