The computer and video game industry has grown more rapidly than cinema, television, or any other entertainment industry that has preceded it.

Many text-based games were developed in the early days of computers, but video games, by definition, are based on graphics. In 1961, almost as soon as a graphic display had become available for a widely used minicomputer, the PDP-1, a team of students at MIT developed a game for it, Spacewar, which became the first widely distributed video game. Ten years later a Spacewar imitation, Computer Space, was the first game to be offered in arcades. The public was not yet accustomed to the kind of interaction that this game demanded, however, so the game that was a breakthrough commercial success in arcades was the simpler Pong.

One of the creators of Pong co-founded Atari Computers, releasing the 1972 arcade game as a home game in 1975. Magnavox had already pioneered the sale of home game consoles in 1972, and its Odyssey system also included the first hardware peripheral for a game, a "light gun." The first consoles offered preprogrammed games, but only a few years later cartridges became available as a means of distribution, and soon a third-party vendor, Activision, started marketing games for Atari consoles.

The 1980s saw the debut of 3-D games (previously, objects such as the aliens in Space Invaders had moved in only two dimensions); use of a virtual world extending beyond what a single screen shows; and distribution on laser discs. Popular games also appeared on new platforms: Tetris on PCs, which previously had been considered incapable of offering engaging video effects, and Nintendo's games on the hand-held Game Boy. At the end of this decade, Sega launched Genesis, with a 16-bit processor that brought arcade-quality graphics to the home.

In the 1990s, a Senate investigation of violence in video games prompted the industry to create the Entertainment Software Rating Board for labeling each game package with the suggested age of players. Also in this decade, computer desktop software shifted to graphic interfaces such as the Macintosh and Windows, borrowing much of the necessary expertise from work that had been done for video games. Internet technology migrated in the opposite direction, from PCs to games, removing distance as a barrier to cooperative and competitive play. Late in the decade, revenue from video and computer games exceeded revenue from the movies for the first time.

The new century saw the rise of massively multiplayer online role-playing games (MMORPGs), in which large numbers of players interact with each other in virtual worlds that persist and evolve even while players are offline. Subscribers to World of Warcraft exceeded 10 million by 2010 but dropped to about 7.6 million by 2014.

Two important advances that let users interact in new ways were Nintendo's Wii, 2006, which allowed players to use the controller for gestures such as swinging a tennis racket, and Microsoft's Kinect, 2010, which used a camera and microphone to react to players' bodily motions and spoken commands and to recognize players' faces and voices.

Today smartphones, tablets, and social networks are widely popular gaming platforms. For example, Zynga's FarmVille, which debuted on Facebook in 2009, engaged 10 million daily players within six weeks. Users may download almost any kind of game to play on their mobile device. Among the most popular are Alto's Adventure, PlayerUnknown Battlegrounds (PUBG), Alto's Odyssey, Sega Heroes, and Shadowgun Legends.