The SMS (Sega Master System) was Sega's answer to Nintendo's 8-bit NES
(Nintendo Entertainment System).
Technically superior, the system never gained much in the way of a large
user base due to numerous factors.
The SMS sported quite a few gems during its short life, however, such as
the renowned RPG Phantasy Star and the highly rated 3-D Glasses.
In Japan (the birth place of the Sega Master System), the "SG-1000"
(early Japanese SMS) came and went pretty quickly.
Later, the "Sega Mark III" appeared, which is similar to the U.S. SMS unit
except for some added FM chips (in fact, Sega of America based our SMS
on the Mark III).
Also available in Japan was the "Sega Master System" (which featured
built-in 3-D hardware) and from Samsung came the "Gamboy" (a licensed
Master System with FM sound).
The Sega Mark III is similar to the U.S. SMS INTERNALLY
(external differences are so dominate, they result in cart incompability
between SMS and Mark III).
The Sega Master System appeared on store shelves shortly after the release
of the NES in 1986 (BTW the A7800 was released 1986, too).
It was Nintendo's success with the NES that showed Sega that there is a
market for videogames systems outside Japan.
So Sega Japan decided to release the reworked Mark III to other countries.