The model 3 is generally regarded as the successor to the Model 1.
Its two 5.25" floppy disk drives could convert model 1 disks.
Initially Radio Shack wanted to sell both the model 1 and 3 at the same time, but the FCC forced them to stop selling model 1. Is so they were discontinued because of the excessive radio noise that they put out.
However, the Model 3 wasn't FULLY compatible with the model 1. There were differences in ROM which meant some programs had to be converted, especially those machine language ones that made ROM calls.
Model III configurations, by Dave Thompson:
TRS-80 Model III was sold in multiple configurations.
No hardrive configurations included:
Model III with Level 1 ROM, 8k RAM sold for US$799. Model III with Level 2 ROM, 16k RAM sold for $999.
The first floppy drive cost $849, and could store 168k. The second drive was cheaper, and could store more. The price difference is due to the first one included the drive controller. The increased space on the second drive (189k) was due to the first drive must also contain some TRS-DOS (the operating system).
Brandt Daniels adds:
There was also a TRS-80 VideoTex Computer terminal in 1980.
Mark Fowler reports:
I worked for a company in 1982 that had integrated a 5MB, and later a 10MB hard disk into the TRS80 Model III. It was then programmed in FORTRAN-66 as a dedicated medical records system, to mimic the pegbook accounting system in use in the 1980's. We introduced green phosphor, and later amber phosphor display tubes. Some systems were used with a modem to do simple email-type applications, and to access various bulletin boards.
TRS 80 MODEL III
Tandy Radio Shack
END OF PRODUCTION
BUILT IN LANGUAGE
TRS-80 Level II BASIC
Full-stroke keyboard with separated numeric keypad
Zilog Z80 then Z80A
16 KB (up to 48 KB)
32 or 64 columns x 16 lines
128 graphic characters
Tape (500 or 1500 bauds), Centronics, RS232
BUILT IN MEDIA
Zero, one or two 5.25'' disk-drives.
TRS DOS (other OSes were available : New DOS, LDOS, MultiDOS, ...)
Built-in power supply unit
Various Tandy peripherals
No disk model : AU$1450 (Australia, 1981) $2495 in 1984 for a complete system with 2x360 KB drives, TRSDOS, 64kb Ram, software and printer