Sega First Releases the Master System in North America
The Sega Master System is an 8-bit cartridge-based video game console that was manufactured by Sega and was first released in 1986.
Its original Japanese incarnation was the Sega Mark III (although the "Master System" name has also been used in Japan). In the European market, this console launched Sega onto a competitive level comparable to Nintendo, due to its wider availability, but failed to put a dent in the North American and Japanese markets. The Master System was released as a direct competitor to the NES/Famicom in the third videogame generation. Despite its shaky performance in the major territories, it enjoyed over a decade of life in smaller markets.
The later Sega Game Gear is effectively a hand-held Master System, with a few enhancements.
Releasing their console much later than Nintendo did give Sega a few advantages though, specifically the technical power of the console. As an 8-bit console, it had a palette of 256 colors, however it was able to display up to fifty-two of them on screen at any given time, which was significantly more than the NES, or at least it could in theory. In reality, most of the games did not use the hardware to its fullest, so the average SMS game looked like the average NES game.
The same held true for the audio capabilities of the SMS. It has a much better sound card than the NES, though back then a better sound card only meant slightly less crappy audio, since low-bit mono was as good as it got. Also like the graphical capabilities, the audio power of the SMS was never really tapped by developers, so you would never really notice the difference between an SMS and NES game just by listening.