The Atari 7800 is a video game console released by Atari in June 1986 (a test market release occurred two years earlier). The 7800 was designed to replace the unsuccessful Atari 5200 and re-establish Atari's market supremacy against Nintendo and Sega. With this system, Atari addressed all the shortcomings of the Atari 5200: it had simple digital joysticks; it was almost fully backward-compatible with the Atari 2600; and it was affordable (originally priced at US$140).
The 7800 was the first game system from Atari designed by an outside company (General Computer Corporation; future consoles designed outside the company included the Atari Lynx and the Atari Jaguar). The system was designed to be upgraded to a full-fledged home computer — a keyboard was developed, and the keyboard had an expansion port (which was the SIO port from Atari's 8-bit computer line) for the addition of peripherals such as disk drives and printers (this should not be taken to imply that this computer expansion would have allowed the 7800 to run programs designed for Atari's computers, as the two architectures were entirely different). GCC had also designed a 'high score cartridge,' a battery-backed RAM cart designed for storing game scores. Atari manufactured none of these accessories, and after the initial production run they also eliminated the expansion port (allegedly for connection to a LaserDisc player). In 1987, the Atari XEGS was released and came with a light gun, called the XG-1. The XG-1 was fully compatible with the 7800 and the 2600. Atari released four games on the 7800 that utilized this peripheral.
The 7800 was test-marketed in southern California in June 1984. One month later, Warner Communications sold Atari to Jack Tramiel, who did not want to release a new video game console under his newly formed Atari Corporation. He pulled the plug on all projects related to video games and decided to focus on Atari's existing computer line in order to begin development of the new 16-bit computer line (which appeared as the Atari ST). The 7800 was re-introduced at the end of 1986 after the success of the Nintendo Entertainment System proved that the video game market was still viable. Unfortunately, by the time the 7800 made it to market, the NES had 90% of the American market cornered and the rival Sega Master System had most of what was left.
The 7800's technical superiority is still debated today. According to a 2003 interview with Leonard Tramiel, the Atari 7800 was essentially "a 2600 with some things put into hardware that were done in software on the 2600". Although this view is held by many, the truth is the 7800 shares little architecturally with the 2600. (In fact, Tramiel's statement is more applicable to the Atari 5200, where the ANTIC drives the GTIA to produce graphics like a 2600 game's kernel drives the 2600 TIA.) Compatibility with the Atari 2600 is enabled by including the same chips used in the Atari 2600. When in 7800 mode, the 2600 chips are used for sound (a cost cutting measure) and the switch and controller interfaces; 7800 graphics are completely generated by the MARIA GPU. The designers allowed games (notably ports from the Atari 400/800 computer line) to include a POKEY audio chip in the cartridge. Only two originally released games, Ballblazer and Commando, used the POKEY chip.
The MARIA GPU is very different from other second and third generation consoles, which made it more difficult for game programmers to make the transition. Instead of a limited number of hardware sprites, the MARIA allows for a much larger number of sprites described in a list of display lists. Each display list contains sprite entries with pointers to graphics data, color information, and horizontal positioning. The same display list is used for multiple rasters with the pointers being automatically adjusted. However, managing and displaying a large number of sprites required much more CPU time (both directly and indirectly since the MARIA would halt the CPU when drawing sprites) than consoles with hardware sprites and backgrounds.
The NTSC 7800 BIOS included code which would generate a digital signature of the cartridge ROM and compare it to the signature stored on the cartridge. This had two benefits. First, it would allow the 7800 to determine whether the cartridge was for the 7800 or the 2600 so the console could be locked into the correct mode. Second, it meant all 7800 games had to be digitally signed by Atari, preventing developers from creating unauthorized games. This digital signature code is not present in PAL 7800s, which use various heuristics to detect 2600 cartridges, due to export restrictions. However, the digital signature long prevented homebrew games from being developed until the original encryption generating software was discovered.