The quite thorough history of video games given in this article starts with the first video games in the late 1940's and ends in 1977. 1977 is a pivotal year for three reasons. First, second generation consoles appeared - with cartridges! Second, the Golden age of arcade video games started. Third, the home computer entered the market. The simultaneous improvements made in these three different hardwares definitely triggered the adoption of video games in our modern society.
It makes sense to analyze the gameplay and graphics of early video games separately. Gameplay and graphics certainly limit, extend or complement each other. However I think the progress made in each of them were made independently. Video game graphics did not improve thanks to gameplay innovations. New gameplays did not appear specifically because developers/researchers found new ways to display objects on a screen. Looking at the controllers also helps to understand which physical affordances the players could have.
1945 - 1965: Origins
The first video games were, like the first movies, technological proofs of concepts. They relied on electronical/electrical engineering prowesses of the time. One could argue that these games were more about cathode ray tube hacks than proper computer logic and graphics. Wikipedia mentions the 1947 Cathode Ray Tube Amusement Device and the 1951 Nimrod as precursors of video games.
OXO (1952) was the first video game, according to students from CMU. It was a version of tic-tac-toe and was only playable on the Cambridge University EDSAC computer. This video shows how the game can be played in an EDSAC emulator. One can measure how clumsy the use of a rotary telephone controller was: the player had to dial the number of the location where he/she wanted to put his/her symbol instead of simply pointing at the location on the screen.
Tennis for two (1958) is a two-player tennis game on oscilloscope. The physicist Higinbotham, creator of the game, reported:
I knew from past visitors days that people were not much interested in static exhibits, so for that year. I came up with an idea for a hands-on display – a video tennis game. A video of two people playing the game shows basic elements of gameplay. Around 0:40, the right player seems to dominate the player on the left. The game was only playable on the Brookhaven National Laboratory device, hence hundreds of people
lined up to play “Tennis for Two”. For each player, the controller consisted of a knob (for the direction) and a button (to hit the ball).
Other games followed, all developed in universities or by true hackers and which platform were university computers. Examples are Mouse in the Maze (1959), Spacewar! (1962) or the PLATO platform (early 1960's).
The second part of the early video game history deals with mainframes, arcade and consoles.