By Steve and Geoff Baxter

ATLANTA (CNN) -- Sega has always been on the cutting edge of next generation video game technology. Sega was the leader in the transition from 8-bit to 16-bit systems when it introduced the popular Genesis console in the late 1980s. Three years ago, it led the migration to 32-bit video gaming. The Sega Saturn was well received but was soon eclipsed by Sony's PlayStation and the Nintendo 64-bit console. Now the struggling company is ready to make a comeback, and it wants to up the video bit ante to 128.

The new system is called Dreamcast, and Sega hopes it will push the company back to the top of the lucrative video game market. Sega's new creation was one of the most anticipated announcements at this week's Electronic Entertainment Expo, or E3. The company claims Dreamcast is the most advanced video game console ever offered for home use -- capable of outperforming many top-of-the-line arcade machines.

The Dreamcast will be released in Japan this fall

The new system is the result of partnerships with several major computer companies. Hitachi's 200MHz SH-4 processor provides the computing muscle for the unit. Microsoft's Windows CE operating system will be the software brains. Power VR graphics from NEC and VideoLogic handle Dreamcast's impressive visuals, and Yamaha has made a 3D audio chip set with 64 channels for music, voices and other sound effects.

Dreamcast sports a high-speed, high-density compact disc drive and a smaller footprint than the Saturn unit. There are four controller plugs in the front of the machine for multi-player use, and the unit will also support gameplay over the Internet. The unit features a 3D-control pad with a unique memory storage device. The Virtual Memory System, or VMS, is a small memory card with a built-in LCD screen. Users enter information on the VMS for sports plays or special fighting combinations and then plug it into the controller. Sega hopes the VMS will be a so-called community builder for Dreamcast users. Players can save games, special characters or teams to the VMS and trade game information by connecting two VMS cards. The unit also doubles as a portable game device complete with control pad and LCD screen.

The VMS doubles as a portable game device

Sega was showing off its Dreamcast technology to buyers and the media in closed-door sessions at E3. If the response is positive, this latest round of corporate technology leapfrog could reestablish Sega as the new leader in the ever-evolving video game industry.

Sega's Dreamcast will be introduced in Japan this fall and in North America next year.

Sony also unveiled a new memory module for its popular PlayStation console. The device, code-named PDA (Personal Digital Assistant) is not a businessman's best friend. It's not intended as a serious business tool but it does have calendar and time-keeping functions. However, the PDA is the ultimate PlayStation memory card. Not only does it save games, but like Sega's VMS, it also operates as a portable game system. And like the Dreamcast unit, the Sony PDA can transmit data to another PDA. Sony's memory unit will be available in spring 1999.

Remember back in 1989 when the Game Boy was introduced? Nintendo chose to go with a monochrome display when Atari and Sega went with full-color, back-lit screens.

"We finally answer the prayers of all those Game Boy players," says Nintendo executive Peter Main.

The wait for color is over. This fall, Nintendo will release Game Boy Color, one of several hardware releases planned for this year. Game Boy Color looks virtually the same as a Game Boy Pocket in size and shape but will display 10, 32, or 56 colors from a palette of 32,000. In addition, Game Boy Color will play all of the 1,000+ games already released for the original Game Boy system. Nicely priced, it will retail for around $80 and should be a huge hit.

E3 visitors also got their first look at the new Game Boy Camera and Printer. Nintendo is using the devices to introduce what they call "funtography." Users plug the camera unit into their Game Boy and capture and manipulate digital pictures and then print them as small stickers. The Game Boy Camera will retail for around $50 and the Printer, $60. Both items will be on store shelves later this summer.

The Jam!! will retail for around $80

Most modern video games are produced using high-resolution computer workstations. When the products finally get to market, consumers view them using low-resolution TV sets. AIMS Lab has an interesting and innovative solution to this problem.

JAM!! is a hardware solution that allows gamers to take their Nintendo, PlayStation, and Sega games to the next level. Through a simple S-video connection, gamers can play their favorite titles on higher-resolution PC monitors. In addition, the sound quality can be boosted through the use of multimedia speakers that come with many computers. JAM!! is PC and Macintosh monitor compatible and retails for $80.