Compared to the Saturn, the Dreamcast is a more back to basics design with a traditional CPU and GPU with a sound chip on the side. At the heart is the Hitachi SH4 CPU clocked at 200Mhz which is a 32bit RISC processor accompanied with 16MB of RAM. Despite the Dreamcast being marketed as a 128bit machine, in reality it was capable of performing four 32bit floating-point operations at the same time, but the CPU cannot handle a 128bit instruction.

On the graphic side, the PowerVR CLX2/Series 2 drives the polygons you see on screen, along with the Holly coprocessor which assisted with the geometry. The GPU is DirectX capable and some games were even written with DirectX 6, but like many PC accelerators it was reliant on the Hitachi Sh4 for T&L. Compared to other graphics accelerators of the time, the PVR2 was known for being very efficient due to its tile-based rendering pipeline,
The Dreamcast graphics was paired with an 8MB of dedicated graphics memory, twice that of the PS2 which gave an advantage for early titles, where Dreamcast games would feature more detailed textures whilst the PS2 port was more compressed. This was due to the design of the PS2, where off-screen textures were intended to be stored in the main system RAM, and on-screen textures were supposed to be stored in the PS2 VRAM. The lack of geometry performance became a problem for the Dreamcast as it lacked in the polygons performance compared to the PS2.

GD-ROM is the storage format used for games and can store around 1.1Gb of data, nearly twice the amount of a regular compact disc. This was a custom format that was designed by Yamaha and was intended to make it more difficult to pirate games due to the larger storage capacity. But then Sega did a very stupid thing…
MIL-CD, this was a CD format standard for audio CDs that was intended to provide interactive content when inserted into a compatible player, similar to the CDi format. The Dreamcast does not check if the disc is genuine when it tries to load MIL software, and this was could be used to exploit the Dreamcast to load software from a CD-R. A bootloader disc was used to bypass the copy protection, and a backup disc could then be inserted.
This was far from ideal as the pirate copy had to be stored on a regular 650MB CD-R, when GD-ROM discs could store up to 1.1GB. Some content was removed or compressed in order for it to fit on the CD disc.

Why not use DVD?

Several reasons: the drive and laser’s themselves were very expensive back in 1998/99 and would be raised the BOM (Bill of materials) considerably. Also the Dreamcast did not have the processing power to decode NTSC or Pal resolution MPEG2, which as the codec DVD video had used. Early desktop PC drives required a separate MPEG2 decoder to do this, and it wasn’t until the Pentium 3 that were able to do MPEG2 decoding without any frame drops. Some video cards could accelerate the decoding process by offloading tasks from the CPU, allowing for a slower CPU to be used instead. ATI was one example with certain models of their RAGE 3D cards and was used by Apple on their lower-end iMac computers to decode DVD video. The PowerVR processer used by the Dreamcast had no such support for this, and dedicated MPEG2 chips were very expensive and in high demand, since they were used by both DVD players and digital set top boxes.
The PS2 sort of worked around this by incorporating the IPU (Image Processing Unit) which acted like an MPEG2 accelerator onto the Emotion Engine. The Xbox uses it’s CPU entirely for decoding.
Then again, knowing Sega they possibly planned for this with an upcoming Sega DVD add-on…

Windows CE, one of the other operating systems that could be used with the Dreamcast. developers could use the Windows CE development environment to build/port their games using DirectX technology, which was attractive for developers who were familiar with Windows PC development. A subset of Win32 was also used.
Typically Windows CE was intended for embedded low power devices such as PDA (Personal Digital Assistants, precursor to smartphones) and set top box’s.
Only a select amount of games used Windows CE, with many preferring to use Sega’s own development tools instead. A Windows CE game will display ‘Powered by Windows CE’ upon startup.

The other Dreamcast

Whilst the Dreamcast was in development, another design was in the works, by Sega Of America. This design would have featured a PowerPC processor (Unknown model, possibly a 604 or the G3 which would have been a good pick at the time) and a custom 3DFX Voodoo graphics processor. Voodoo graphics were popular on Windows PC of the time and a few arcade boards also used 3DFX technology.
It all went pear-shaped when Sega went with the Hitachi/NEC PowerVR solution.

The other-other Dreamcast

Panasonic approached Sega with the design of the M2/MX console for use with Sega’s next-generation console. The deal fell through when a botched chip design meant the tech demo that was due to be shown wouldn’t run. Presumably this would have also used a PowerPC CPU, as the M2 uses two PowerPC 602. It wasn’t until the Gamecube that we got a proper PowerPC-based console.
Real3D was also interested in creating the graphics for the Dreamcast console but abandoned plans when the Intel i750 failed in the market.
Nvidia (yes) was also in consideration for Sega’s next console, as their NV1 chipset was used for several Sega PC ports and there were some similarities with the rendering method that both the NV1 and the Saturn employed, however they are completely different chipset designs.

Controller

The Dreamcast controller was built off the previous 3D pad and incorporated some of the Nintendo 64’s design concepts such as removable add-ons that could be slotted into the controlled. The Dreamcast controller features two slots for the VMU and an additional accessory such as a memory card, vibration pack or microphone. Support for these is dependent on the game itself.
On the controller itself there are four face buttons, two analog triggers marked as L and R, a start button, a directional pad and an analog stick. A hole for the VMU display is present and allows the VMU to be used as a display for that player, which some games took advantage of to display information specific to the player.

Speaking of the VMU and memory cards, these were very limited in space and could only store up to 128KB, the same as the memory card for the original PlayStation. The benefit however was games were no longer tied to fixed blocks and used as much space as they only required. However the Dreamcast will not support larger memory cards, and any memory cards that are larger than 128KB require the use of a button to change between different memory banks, of which only 128KB is available per bank. In contrast to the PPS2 and Gamecube which supported much larger memory card sizes (8MB for the PS2) and the Xbox which used its 8GB hard drive to store game saves, this was a major hindrance for the Dreamcast. This was made worse due to the fact some games use the VMU to store DLC.

Keyboard: A QWERTY keyboard was released which was intended for internet browsing but could be used for games also. Unreal Tournament and Typing of the Dead made use of this. The keyboard plugs into the controller port.
Mouse: To complement the keyboard, a mouse was released. Again this was also supported in selected games and in Unreal Tournament you could play using both the keyboard and mouse.

Expansion

Like Sega’s other previous console, the Dreamcast had an expansion port to allow for future accessories and upgrades to be installed into the console, support of which would be dependent on the console itself. By default a modem comes bundled with the Dreamcast to allow for online play. This could be swapped for an ethernet LAN adaptor for users of broadband connections (Remember this console came out in 1999, and broadband or even ISDN was very uncommon back then) Games using the Windows CE runtime did not support the ethernet adaptor.

Evaluation

Lack of backward compatibility with the Saturn and the MegaDrive was a downside for the Dreamcast, as the PS2 included full support for the PlayStation library of titles by default, and could enhance the graphics of some titles. The complexity of the Saturn hardware was a reason or this as even with modern PC hardware, Saturn emulation is still a struggle since all of the processors must be in sync, and the lack of documentation available for some of the obscure processors.

Arcade

Naomi

Arcade version of the Sega Dreamcast console, but has some upgrades. The main system RAM has been doubled to 32MB, along with the graphics RAM also being doubled to 16MB, lastly the sound RAM has been increased to 8MB. Aside from memory, the CPU and GPU clock speeds remain the same. This can cause issues when porting a game to the home Dreamcast, as texture quality and detail have to be reduced in order to run.
Although initially designed to run games off socketed PCB ROM, a GD-ROM version allows for loading games off the disc. Dreamcast games cannot be played on Naomi hardware.

Atomiswave

The closest of all the arcade boards to the Dreamcast, and has the same memory configuration. Some of the Atomiswave games have been ported to the Dreamcast unofficially and can run without any major issues.

System SP

A Naomi arcade board adapted to loading games off a compact flash card for fast loading times. Also a lot cheaper than using custom ROM board PCB’s like the Naomi used.

Hikaru

A best of an arcade board, and considered to be the proper successor to the Model 3. This board uses the Dreamcast hardware as a base, since it contains the same Dreamcast SH4 CPU in a dual processor arrangement, with a customized 3D graphics processor.

Not much is known about the 3D hardware, other than its is a Sega customized 3D solution. The only vendor that comes to mind is SGI, whose vPro (InfinitePerformance) hardware had Phong shading support, known as per-pixel shading.

https://en.wikipedia.org/wiki/SGI_VPro
Apart from that I’m not sure who else was capable of that, Evans & Sutherland?

Naomi 2

An upgrade over the first Naomi system, featuring dual Hitachi SH4 processors, dual PowerVR graphics processors, and a Videologic Elan processor which is responsible for hardware transformation and lightening. This increases the polygon count significantly and puts it in the league of Xbox and Gamecube.

Games