The Atari 7800 was the console to redeem Atari in the eyes of their fans. The 6502C processor, SALLY 6502 ("6502C") clocked at 1.19-1.79MHz, was significantly more powerful than those found in any console at the time the system was being developed by General Computer Corporation (GCC). The console had a system memory of 4KB RAM, 4KB BIOS ROM, with 48KB Cartridge ROM space. The Atari 7800 was capable of various displays ranging from 160×240, 320×240 (160×288/320×288 if PAL), with 25 on-screen colours out of possible 256. The systems graphics were handled by the MARIA custom chip clocked at 7.16MHz. The stem was backwards compatible right out of the box with no alterations, or peripherals as the TIA chip was built onto the system board.
The Atari 7800 was plagued with issues, however. First off, the sound was the weakest aspect of the system. With the 2600 hardware (TIA chip) onboard for backwards compatibility, the ability to add a better sound chip was not possible due to restrictions in space and cost. For example, Dig Dug for the VCS/2600, and the 7800 both had identical sound effects and music. GCC worked around this by allowing the cartridges to have the POKEY sound chip included. The only games that included this chip was BallBlazer and Commando. Other games did not include this feature as a means to reduce overall costs on production.
The second issue that plagued the Atari 7800 was the strict licensing agreements that Nintendo enforced upon developers. Thanks to loopholes due to arcade distributors, and shell companies, Atari was able to secure a handful of arcade titles on the system. Regardless, Atari still had troubles encouraging developers to bring games to the console due to a limited market reach.
The Atari 7800 was also poised to be a remarkable console ahead of its time. The Atari 7800 originally had an I/O port that would have allowed the system be connected to LaserDisc players. This was to allow games like Dragon's Lair, Space Ace, and other popular laserdisc games of the era to come home. Unfortunately, this was ultimately scrapped due to the expensive laserdisc players not taking a strong foothold in the market.
Atari also intended for the console to allow for a keyboard, and other PC-like peripherals to be connected to the 7800 through the I/O port. This would effectively turn the Atari 7800 into a full fledged personal computer. This was skipped as Atari, under Jack Tramiel, was concerned that this would impact Atari's 8-Bit computer line, as the Atari 7800 with peripherals would be far less expensive than a true Atari computer.
The above mentioned I/O port was removed from the second and third iterations of the system. The cutout for the port was ultimately removed by the third iteration, as well.
The Atari 7800 was discontinued on January 1st, 1992 making way to the next generation Atari console, the Atari Jaguar.