How did the hardware know the software was foreign?
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Economic conditions were (and sometimes still are) a lot different in the US and Russia and Hing Kong in 1995, so game prices could be dramatically different across regions.
They didn’t want people taking advantage of currency exchange rates to buy Russian copies of games for $4 and exporting them to the US, so hardware tended to be region specific.
Sometimes the actual cartridge slot and/or pin configuration was different, and sometimes it was just a number stored in the software somewhere. I remember tales of people cutting chunks of plastic off of Japanese cartridges so they’d fit in a US console.
Very few companies distribute their product themselves worldwide. It’s a lot more efficient to make a deal with an existing distributor. So, in the US you sell games through GameStop and BestBuy perhaps. In other countries, you make a different deal with a different company. What GameStop and BestBuy don’t want is cheaper copies of the game from your Latin American company getting into the US and undercutting their sales.
So, to appease your US distributors, you region lock your stuff.
The how is easy – there was a little bit of code on the disk that said what region the game was sold in. The console would only play games if the region code was the same as the console code.
The why gets into copyright law and licensing. Each country is going to have different rules for how/when media can be sold there, as well as different pricing structures based on what the local markets can afford. Just like music/movies/tv shows, video games would be sold in some markets at some prices, and in different markets at different prices (or not at all). As the owner of the IP, the video game publisher has the rights to make those decisions, and reasonably restrict folks from using out of region media.
So, as an example, the publisher may have an agreement to sell the game at Best Buy in the US for $60. Best Buy is fine with that, but only so long as no one else in the US sells the game for cheaper. The publisher then sets and agreement with a similar store in India, but agrees on a price of $40 for the game. To ensure that the agreement with Best Buy isn’t breached, the publisher says that the Indian version can’t be played on consoles in the US – only the US ($60) version can.
Earlier consoles (think cartridge format) used a different physical connector in most cases. The Super Nintendo in the US had two plastic knobs that prevented European and Japan games from being inserted.
This was required at the time because European television sets operated in a different frequency range of 50Hz than the US 60Hz range.
The 1989 Gameboy never had that issue because the screen was constant across regions.
When Optical media became a thing (Sony PlayStation, later DVDs), there was still a 50Hz frequency issue in Europe so region locking was encoded onto the player to match the discs encoding. This issue is a thing of the past now, so anything still region locked is more than likely a pricing strategy.
Some countries have intellectual property laws that aren’t compatible with others. Sometimes it’s like sanctions for them.
same reason movies often come out at different times in different countries, attempting to milk the max profit from their content
Market Pricing.
You can sell games for $50 in the US and Japan, but maybe not South America. You need to be able to sell them for $20-$25 to be competitively priced in that economy.
If you make the console regionally locked, you force people to buy games in their own market and not buy a bunch of $5 Taiwanese versions to be used/sold in the US.
To prevent people from buying a bunch of one product in a region where it’s cheaper and selling it at a markup in a region where it’s more expensive.
This is less of a concern now, with more or less equal pricing all around.
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