The PC Engine was a collaborative effort between Japanese software maker Hudson Soft (which maintains a chip-making division) and NEC. In a classic example of good timing, Hudson was looking for financial backing for a game console they had designed, and NEC was looking to get into the lucrative game market. The PC Engine was and is the smallest video game console, due primarily to a very efficient three-chip architecture and its use of HuCards, credit-card sized data cartridges. It featured an enhanced 6502 processor and a custom 16-bit graphics processor, as well as a custom video encoder chip, all designed by Hudson.
The PC Engine was extremely popular in Japan, besting Nintendo's Famicom in sales soon after its release, with no fewer than twelve systems released from 1987 to 1993, and new games released as recently as 1999. It was capable of up to 512 colors at once in several resolutions, and featured very robust sprite handling abilities. The Hudson-designed chroma encoder delivered a video signal more vibrant and colourful than both the Famicom and the Sega Megadrive and is largely regarded as the equal to Nintendo's Super Famicom, the PC Engine's contemporary competition.
It was the first console to have a optional CD module, allowing the standard benefits of the CD medium: more storage, cheaper media costs, and redbook audio. The efficient design, backing of many of Japan's major software producers, and the additional CD ROM capabilities gave the PC Engine a very wide variety of software, with several hundred games for each the HuCard and CD formats. Here's a screenshot gallery (http://nfg.2y.net/games/pce/gallery/).
Several of the PC Engine systems and its US- and Europe-released counterparts are possibly the most commonly mispelled video game systems of all time. The -Grafx suffix, used for the Japanese CoreGrafx and SuperGrafx, as well as the US + EU TurboGrafx, is spelled incorrectly almost as often as not. Grafix, graphx and countless permutations thereof.