The fifth generation started on an interesting note, since the first two consoles to enter the scene were manufactored by third parties, instead of their first party owners. The 3DO and the Atari Jaguar kicked off the fifth generation with their release in 1994. They featured the usual graphics upgrade that anyone would expect from a next generation console, but they had some major design flaws that pushed away any potential third party support. It didn't help that their competition decided to bite the bullet and sell their consoles at a loss, but the 3DO and the Jaguar didn't have that luxary, which led to poor sales.
In 1994, Sega began the fifth gerneration by releasing an add-on to the Sega Genesis, the 32X. The 32X drastically increased the graphical power of the Genesis, which allowed it to use 32-bit graphics, and it was very affordable too. Sadly, the console suffered from a shallow game library and it was released during the dawn of a 3D obsessed generation, which shunned anything that still used the traditional pixel art. The dramatic power expansion to the Genesis ment that it would have exclusive games that would take full advantage of its superior capabilities, however, this only fragmented the Genesis' consumer market. The 32X was discontinued in 1996 and was considered a commercial failure.
NEC decided to put the better storage capacity and cheaper manufactoring of CD-ROMs to use with the release of the successor to their TurboGrafx-16, the PC-FX, in 1994. It was a 32-bit console that boasted better full-motion video than any other system on the market. Despite its impressive abilities, it was incapable of handling 3D graphics, which meant that it shot itself in the foot, before it even left the saloon. It sold worse than Sega's 32X, it was never released outside of Japan, and the only success it got was from a niche market of dating sims and visual novels.
After the failure of their 32X, Sega released the Sega Saturn in 1994. The Saturn was very advanced, but it it was hard to program games for, especially 3D ones, which shot its chances of being a worthy competitor in the foot. It sold well in Japan, due to its exclusives, but most of them weren't released in North America or Europe, since Sega's branches there believed that most of them didn't suit a western audience.
Towards the end of the fourth generation, Nintendo partnered with Sony to create a CD add-on for the SNES, but the partnership ended almost immediately, since Sony wanted to retain more control than Nintendo was willing to allow. Sony, not wanting to waste their efforts, decided to enter the industry with their own console, the Playstation, in 1994. The console used a disc-based sytem, giving developers the ability to create larger games and to manufactor them for a fraction of the cost. The Playstation was marketed as a 3D console, claiming that, "[Its] 3D graphics would be the future of gaming." Sony managed to win over third party support, while Nintendo drove them away.
The Nintendo 64, released in 1996, was a little late to the party, but it smashed the door down with its strong first party games; however, because of Nintendo's decision to have the the 64 use cartidges, Nintendo drove away third party support. While its true that the Playstation was only a 32-bit console and that the 64 was a 64-bit console, the Playstations CD's allowed for much greater storage. Its superior storage gave it superior graphics, while giving the developers the ability to create cutscenes and soundtracks. Sony managed to sell roughly three times the number of console units as Nintendo, forcing them to switch over to CD's the following generation.
Handheld conoles released during the fifth generation include: The Sega Nomad, the Game Boy Pocket, the Game.com, the Game Boy Light, the Game Boy Color, and the Neo Geo Pocket.