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Although there is no rigid definition, a microcomputer (sometimes shortened to micro) is most often taken to mean a computer with a microprocessor (µP) as its CPU. Another general characteristic of these computers is that they occupy physically small amounts of space.

Desktop computers, video game consoles, laptop computers, tablet PCs, and many types of handheld devices may all be considered examples of microcomputers according to this technical definition.

However, everyday use of the expression (and in particular the "micro" abbreviation) has declined significantly from the mid-1980s onwards, and is no longer commonplace. It is most commonly associated with the first wave of all-in-one 8-bit home and small business microcomputers (such as the Apple II, Commodore 64 and BBC Micro). Although—or perhaps because—an increasingly diverse range of modern microprocessor-based devices fit the definition of "microcomputer" given above, they are no longer referred to as such in everyday speech. Most of the equipment used by a microcomputer is tightly integrated within a single case, although some equipment may be connected at short distances outside the case, such as monitors, keyboards, mice, etc. In general, a microcomputer will not get much bigger than can be put onto most tables or desks. By contrast, bigger computers like minicomputers, mainframes, and supercomputers may take up some portion of a large cabinet or even an entire room.

Most microcomputers serve only a single user at a time, but some, in the form of PCs and workstations running e.g. a UNIX(-like) operating system, may cater to several users concurrently. The µP does most of the job of calculating on and manipulating data that all computers do.

Along with the CPU, a microcomputer will come equipped with at least one type of data storage, a very high-speed, volatile device known as RAM. Although some microcomputers (particularly early 8-bit home micros) can perform simple tasks using RAM alone, some form of secondary storage is normally desirable. In the early days of home micros, this may have been something as simple as a cassette deck (in many cases as an external unit). Later, there was a tendency for secondary storage (particularly in the form of floppy and hard disk drives) to be built in to the microcomputer case itself.

Other devices that make up a complete microcomputer system can include its power supply, and various input/output devices used to convey information to and from a human operator (printers, monitors, human interface devices).

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The world's first commercial microprocessor was the Intel 4004, released on November 15, 1971. The 4004 processed 4 binary digits (bits) of data in parallel; in other words, it was a 4-bit processor. At the turn of the century 30 years later, microcomputers in embedded systems (built into home appliances, vehicles, and all sorts of equipment) most often are 8-bit, 16-bit or 32-bit. Desktop/consumer microcomputers, like PCs, are mostly 32-bit, while some science/engineering workstations as well as database and financial transaction servers are 64-bit (with one or more CPUs).

The first generation of microcomputers, for engineering development and hobbyist personal use, was launched in the mid-1970s; the MITS Altair being the most well-known example. 1977 saw the introduction of the second generation, known as home computers. These were considerably easier to use than their predecessors, whose operation often demanded thorough familiarity with practical electronics. It was the launch of the VisiCalc spreadsheet (initially for the Apple II) that first turned the microcomputer from a hobby for computer enthusiasts into a business tool. After the 1981 release by IBM of their IBM PC, the term Personal Computer became generally used for microcomputers compatible with the IBM PC architecture (PC compatible).