A few additional notes to fondue's spanky writeup:

The Mark 3 was superior to the Master System released outside Japan, as it contained an excellent FM synth chip, capable of producing some phenomenal tunes. Probably the finest example of this is Phantasy Star, although Fantasy Zone 2 and Spellcaster (Kujaku-Ou in Japan) were also superb. FM is emulated perfectly in Meka and other SMS emulators, but unfortunately the FM code was removed from the translated Phantasy Star cartridge, so track down a Japanese ROM.

The Snail Maze was a fantastic game. Built into the BIOS of the first version of the SMS1 (removed when Safari Hunt and Alex Kidd were integrated in later versions), it could be accessed by booting without a cartridge, and holding down UP+1+2 on controller one. The game consisted of a series of increasingly difficult mazes (white on blue background) which had to be completed in a set time limit by the player, represented by a snail. Not hugely fun, but it played the most infectiously catchy tune ever. Doot doot doot doot...

The mass of official Sega controllers and periphials seen for the Dreamcast is a tradition. The SMS sported the following:
  • Sega Control Pad - the official pad. Blocky corners made it uncomfy.
  • Sega Control Stick - hilariously loose joystick, with a giant head. Notably had buttons on the left hand side of the stick.
  • Sega Handle Controller - A flight yoke or set of bike handles, depending on which game you were playing. Had a stuck on instrument display with a maxed out speedometer. Broke very easily during frantic games of After Burner.
  • SG Commander - A more expensive version of the basic pad. Had a more robust d-pad and - thank god - rounded corners.
  • Light Phaser - Damn near identical to the NES offering. Curiously indestructable.
  • SegaScope 3D Glasses - Far ahead of their time. Delivered the best true 3D seen in console games to this day.
  • Sports Pad - A trackball, with pad buttons to the left of the ball. Very limited release outside Japan, which meant we never got excellent games like Megumi Rescue. Can be adequately emulated using the mouse.
  • Paddle Controller - Your guess is as good as mine. Certainly released in the UK, although I only ever saw the box once. If anyone knows, /msg me.
  • Infra-Red Control Pad - Wireless wonder. Notable for actually working, which was novel.
  • Rapid-Fire Unit - The RFU worked as a joypad passthrough. While active, holding down fire would cause rapid fire; seeing as the SMS wasn't originally supposed to be capable of this, it led to some interesting bugs/cheats in early games. Initial versions of this device were curiously made out of metal.
  • Telecon Pack - The Japanese had all the fun. You plugged a gaudily coloured mini radar dish into the back of your TV, and popped it on the telly. Then you plugged a matching unit into the back of the Mark 3, and the M3's AV output appears on the TV. Pointless, but undeniably cool.
Lastly, the UK version of the SMS suffered horribly from the 50Hz/60Hz PAL/NTSC disparity. Any UK gamer reliving his past through emulation will wonder why the music in all the games seems so much faster; because it is. Likewise, games are tougher at full speed. So beware.