Introduced in 1985, the NES was an instant hit. Over the course of the next two years, it almost single-handedly revitalized the video game industry. Selling over 60 million units, people brought games like Mario and Zelda into their homes for the first time on the NES.
In 1982, Nintendo developed a prototype system dubbed the “Advanced Video System” (or AVS for short) and had controllers much like the NES. There were accessories such as a tape drive, a joystick, and a lightgun, and along with all of that, the system was made of a computer, much like the Atari 400, Commodore Vic-20 and Commodore 64. It was never released and is on display at the Nintendo World Store in New York. In July 1983, Nintendo released the Famicom (Family Computer) system in Japan, which was its first attempt at a cartridge-based video game console. The system sold over 500,000 units within two months at a price of around $100 USD. However, after a few months of favorable sales, Nintendo received complaints that some Famicom consoles would freeze when the player attempted to play certain games. The fault was found in a malfunctioning chip and Nintendo decided to recall all Famicom units that were currently on store shelves, which ultimately cost them approximately half a million USD.
During this period, Nintendo rekindled their desire to release the Famicom (Or Nintendo Entertainment System) in the US. Since the company had very little experience with the US market, they had previously attempted to contract with Atari for the system’s distribution in 1983. However, a fiasco involving Coleco and Donkey Kong soured the relationship between the two during the negotiations, and Atari refused to back Nintendo’s console.
In 1983–1985, a large scale recession in video game sales hit the market which amounted to a 97% decrease primarily in the North American area. The recession is known as the “video game crash of 1983” was caused by a few main factors including the flooding of the console market, the competition of home computers, inflation, and loss of publishing control. The video game crash of 1983 soon took out not only Atari but the vast majority of the American market itself. Over time, dominance in the market shifted from America to Japan. Nintendo began exporting to America and had virtually only one major competitor in the market, Sega, which was another Japanese company.
Nintendo was determined not to make the same mistakes in the US that Atari had. Because of massive influxes of games that were regarded as some of the worst ever created, gaming had almost completely died out in America. Nintendo decided that to avoid facing the same problems, they would only allow games that received their “Seal of Quality” to be sold for the Famicom.
In 1985, Nintendo announced that it was releasing the Famicom (Family Computer) worldwide with a different design under the name of the Nintendo Entertainment System (NES). They used a creative tactic to counter the bad view that the media was giving on video games, and released the NES with R.O.B. units that connected to the console and were synchronized to the games. To ensure the localization of the highest-quality games by third-party developers, Nintendo of America limited the number of game titles third-party developers could release in a single year to five. Konami, the first third-party company that was allowed to make cartridges for the Famicom, would later circumvent this rule by creating a spinoff company, Ultra Games, to release additional games in a single year. Other manufacturers soon employed the same tactic. Also in 1985, Super Mario Bros. was released for the Famicom in Japan and became a large success.
Nintendo test-marketed the Nintendo Entertainment System in the New York area on October 18, 1985. They expanded the test to Los Angeles in February 1986, followed by tests in Chicago and San Francisco. They would go national by the end of 1986, along with 15 games, sold separately. In the US and Canada, it outsold its competitors by a wide margin. This was also the year that Metroid and Super Mario Bros. 2 (the Japanese version) were released. In 1987, The Legend of Zelda was released to much critical acclaim.
Read more about the console on Wikipedia