The Atari STe is the successor of the Atari STf (The 'e' means enhanced)
and is almost fully compatible with the STf. 
In september 1986, Atari decided to make a successor to the STf.
They planned to equip it with enhanced video features : Atari said then
that the STe will have a 640 x 400 with 16 colors among 4096 and a 
320 x 200 with 256 colors among 4096 graphic modes.
Unfortunately, eventually, the STe will have none of these graphic modes. 

The new features are :
- a new version of the OS ("Rainbow" TOS 1.6 and later, 1.62),
- a Blitter chip to quick perform memory moves (it is the the Mega STf one),
- the video chip (Shifter) has been enhanced: the STe can perform,
as the Amiga, hardware scrolling in all directions and it is possible to
write into the video counters. 
It also handle 4096 colors instead of 512, unfortunately, it can only 
display a maximum of 16 of them (without trick).
- It has enhanced sound features too: two 8 bit PCM channels which can 
replay stereo sound at 6.25, 12.5, 25, or 50 KHz and which can be mixed
with the 3 FM channels. 

Despite its new and interesting characteristics, the Atari STe was a
flop in the marketplace. The STf market was too important and the
software editors (especially game editors) didn't sell STe versions of
their products.

Not long after this, Atari launched the Mega STe to replace the Mega STf.

(www.old-computers.com)