The Atari 2600 was the first console that gained wide market success and is considered the console that made home gaming popular. While not the first console to do so, the Atari utilized easy to insert and remove cartridges instead of storing games on the systems internal memory. This allowed the consumer to continue to purchase new games separately and expand their game library without needing to purchase new hardware.
The 2600 was released in October 1977 for $199. The system shipped with two paddle controllers, two joystick controllers and the game Combat. The system originally was named the Atari VCS, for Video Computer System. Following the release of the Atari 5200 in 1982, the VCS was renamed "Atari 2600", which has become the most used name for the console. Atari struck a deal to sell the VCS as re-branded console at Sears. The system (while technically identical to the 2600) was called the Sears Video Arcade and sold through Sears, Roebuck and Company stores. The Sears Video Arcade played all the 2600 games available, but some games were also renamed (under the Sears Tele-Games label) and sold only at Sear despite being the same as the non-sears branded versions.
In 1977, despite having won over many of their competitors, the VCS only sold 250,000 consoles. The production for the console was being done in California, so to reduce costs Atari began manufacturing the system with cheaper materials in China. In 1978 800,000 systems were manufactured, and 550,000 sold. Despite the initial low sales, and the Atari founder Nolan Bushnell leaving the company, popularity increased and in 1979 one million units sold.
In 1982, with the system continuing to sell well and popularity rising, the system was resdesigned. The 6 front switches was reduced to 4 as two were moved to the back, and the wood grain finish was replaced with a solid black strip. The 5200 was also released as a console that would play both new and advanced games as well as the original 2600 cartridges.
By 1983 Atari had reached it's peak, pouring tons of resources in research and development projects related to video games, computer systems, and other products. While the majority of these projects never came to fruition, those that did preformed poorly. However the 2600 continued to sell well.
1983 is also remembered in the game industry for being the beginning of the 80's video game crash. As the 2600 was the biggest console in the market at that time, much of the negativity about the crash revolves around Atari. Several factors are considered to be the cause of the crash. The first was the overcrowding of the marketplace. As many other companies tried to repeat Atari's success with their own consoles, more and more hardware made it's way onto store shelves confusing consumers.
Atari itself was not highly thought of by the developers who were creating games for the 2600. Atari did not let any designers or developers take credit for the games they've produced. Some developers resorted to hiding their names as easter eggs in some games, but the earliest of those rebels were fired if Atari stumbled upon those. This led to the creation of Activision, a group of disgruntled Atari employees who left and began developing their own games for the 2600. As these games were more popular that the official Atari titles, Atari moved to have legally ban third party development on their consoles, but failed. This led to several other third party developers including Imagic and Coleco, as well as Mystique who tainted the image of the 2600 by producing pornographic games for the console.
The influx of content for the system led to a problem with quality control. Many terrible games were being released, and in order to compete Atari rush development and made several big mistakes leading to gamers growing frustrated with the poor quality games coming out. Two of Atari's biggest hits ET and Pac Man ended up, despite selling well, to be considered to be good representations of the bad quality which caused many gamers to leave the hobby.
Atari's popularity and sales dropped drastically over the next couple years, as did all sales in the video game industry. It wasn't until the NES was released that things started looking up again. Atari attempted to give the 2600 another run at that point before eventually stopping all production on the 2600 in 1991.