Nintendo saw firsthand how successful videogames were in the late 1970's. They also saw the success the Colecovision, released in 1983, had with their own game, Donkey Kong, as a pack-in. Nintendo wanted to get into the console race. At first, they distributed the Magnavox Odyssey in Japan, before they decided to make their own console.
Hiroshi Yamauchi, then CEO of Nintendo, wanted this console to outperform the other consoles. He decided to let Masayuki Uemura make this console. At first, the console was supposed to be a 16-bit machine with a disk drive, and average for 75 U.S Dollars. However, the price was too high due to component prices, and so they made an 8-bit system. The disk drive would be an add-on exclusively in Japan.
The Nintendo Family Computer was made intentionally to look like a toy. The Famicom design was only used in the Japanese version of this console. It had a smaller cartridge port on the top of the unit than the NES (60 pins vs. the NES's 72 pins), no regional lockout circuitry, and hard-wired controllers with a 15-pin expansion port on the front of the unit for a light gun, Power Pad, special controller, keyboard for BASIC programming, etc. It had many additional hardware peripherals that were only available in Japan, including a karaoke machine, true 3D glasses, and a floppy disk drive, the Famicom Disk System, that could be used to play games purchased at game kiosks in stores.
The Famicom was released in Japan in July 1983 for 100 USD. The first games for this console were Donkey Kong, Donkey Kong Junior, and Popeye. At the end of the year, they made versions of the latter two games that supported two players. They had also made a Baseball game, Mario Brothers, a Go title, and an adult title.
During its first year, people found the Famicom to be unreliable, with programming errors and freezing rampant. Yamauchi recalled all sold Famicom systems, and put the Famicom out of production until the errors were fixed. The Famicom was re-released with a new motherboard. It sported the same design, however.
The Famicom's decline started when NEC released the PC Engine in 1987, and Sega released the Sega Megadrive in Japan in 1989. When Nintendo saw their market get eaten away by the PC-Engine and Megadrive, the Super Famicom, the NES' successor, was released. Nintendo recaptured the Japanese market thanks to the Super Famicom, but the Famicom wasn't dead yet, and wouldn't die for a long time.
A redesigned Famicom, called the AV Famicom, was released in Japan in 1993. However, it had a 60-pin connector and had composite output only. They had be found brand new in many denki-ya in Japan until recently, from ¥4,800 to ¥7,200, equivalent to $42-60. The new Famicom was released because many Japanese televisions at the time only had AV output, which meant that the old model was already out of date in 1993. The original Famicom was RF only, so the Japanese made a new model. The FC Expansion port was moved to the right side of the console, and the microphone on controller 2 was removed. The controllers are detachable;the older Famicom had the controllers wired in.
An original, unmodified Famicom cannot be used on US TV Signals properly. Even if one got it working, the picture would be on one channel and the sound would be on another channel. The newer Famicom can be used on US televisions.
Famicom fans on foreign shores would have an easier time buying the newer Famicom over the older one, as they do not have to mess with the RF output of the older one, and it is still widely availible with importers.