The Atari 65XEGS was intended to be a dedicated game console concept called the XE Game System. Atari aimed to create a hybrid system that would function as both a game console and a personal computer. The idea was to combine the flexibility and power of the Atari 8-bit computer line with the simplicity of a plug-and-play gaming experience, competing with home consoles like the Nintendo Entertainment System (NES). Atari released the 65XEGS as a repackaged 65XE with a detachable keyboard, joystick, and a selection of bundled games, providing users with the option to use it either as a straightforward gaming console or as a computer.

The 65XEGS featured compatibility with a broad range of Atari 8-bit software, which included educational programs, productivity tools, and a vast library of games from the earlier Atari 400/800 and XL models. By marketing it as a console, Atari hoped to capture the growing home gaming market, leveraging its existing catalog to appeal to both gamers and those interested in entry-level computing. Atari's approach allowed it to offer a more versatile experience than other consoles, as users could seamlessly switch from gaming to more serious applications, depending on their needs and the accessories they added.

While the hybrid concept of the 65XEGS showed promise, it struggled to compete with the specialized consoles of the time. Gamers tended to gravitate toward the NES, which had a more extensive, exclusively game-oriented library. Nevertheless, the 65XEGS found its niche among enthusiasts who appreciated its dual-purpose design and Atari’s legacy. Today, it’s remembered fondly as one of Atari's last 8-bit systems, offering a unique blend of gaming and computing that marked the end of an era for Atari's home computer line.