Magnavox (which merged with Philips in 1974) released the Odyssey² in 1978 to compete with brand new cartridge based video game systems like the Atari VCS, RCA Studio II or Fair-Child Electronics Channel-F.
Initially, Magnavox had developped a prototype system called "Odyssey 2". It did not have the ability to use cartridges but had 24 games built-in and could be played by up to 4 players simultaneously. But this console never made it to the shelves, and the Odyssey² (a complete different system in fact) was marketed instead.
The system is powered by an Intel 8048 microcontroller and a Video Display Controller (VDC) generating all audio & video. This VDC, which is a custom Intel IC, can generate 4 different types of graphic objects: a background grid, single characters, quad characters (made of 4 single characters) and sprites. A maximum of 4 independent sprites can be displayed. There are monochrome and of 8 x 8 pixels in size. Of course the VDC can detect sprite collisions.
The Odyssey² has 64 pre-defined characters (letters and graphic symbols) in memory. Up to 12 foreground characters can be displayed from this internal character set. Many games (especially eraly ones) used a lot those pre-defined characters: man walking, right arrow, slopes, tree, ships, plane and a ball.
The flat membrane keyboard of the Odyssey² was a major selling point. It was meant to be used for game selection, educational games, programming, entering its name for hi-scores,etc. Apart from the game selection, it was hardly used.
Though not as popular as the Atari VCS, or later Intellivision, the Odyssey² did well in the US and even better in Europe where it was marketed by Philips as the G7000 Videopac and Philips C52 in France. Even the Odyssey3 prototype (which never came out), was somehow released in Europe as the Philips G7400 system, Videopac+ and Jopac systems.
Information on the European version by Taneli Lukka from Finland:
The European version of this system, Philips Videopac G7000, has a couple of quite weird charasteristics.
It has no power on/off button, the system is switched on just by plugging it into the wall socket. This is not very handy if you don't have a free wall socket nearby. Games can be inserted and taken out with the console on. You just have to press the reset button after inserting a game.
Late model machines also have all the cables (RF, power and controllers) hardwired to the system so you can only replace them by taking your console apart.