As game hardware improved, sprite scaling became a popular technique, first for arcade games in the 1980's, and then for console and computer games in the 1990's. Scaling allowed for characters, items or other sprites to smoothly grow or shrink on the fly, creating a 2.5D effect.
The first games to use sprite-scaling were arcade driving/racing games, by companies such as Sega and Namco; some of the earliest examples include Sega's Fonz (1976) and Turbo (1981), and Namco's Pole Position (1982). Some of the earliest action games to make use of extensive sprite-scaling were Sega's SubRoc-3D (1982) and Buck Rogers: Planet of Zoom (1982).
See: Super Scaler
Sprite-scaling was later popularized by Sega's powerful Super Scaler arcade graphics boards, which were capable of scaling thousands of sprites every second; some of Sega's popular Super Scaler arcade games included Hang-On (1985), Space Harrier (1985), Out Run (1986), After Burner (1987), Thunder Blade (1987), Galaxy Force (1988), and Last Survivor (1988).
Following the success of Sega's Super Scaler games, rival arcade developers such as Konami, Namco and Taito began producing their own sprite-scaling arcade games in the late 80's.
X68000 and Neo Geo
See: Sharp X68000 and Neo Geo
Among home gaming systems, the Sharp X68000 computer (launched 1987) was capable of smooth sprite-scaling, though it wasn't able to scale as many sprites as Sega's Super Scaler arcade systems.
SNK's Neo•Geo arcade-based console (launched 1990) was notorious for utilizing sprite scaling in its fighting games to simulate a camera "zooming" in and out of the actions depending on how close the combatants were to each other.
Mode 7 and Ray-Casting
See: Mode 7 and Ray Casting
Another popular type of sprite-scaling was Mode 7, used to scale and rotate backgrounds for various games on the SNES console (launched 1990).
The ray-casting method was yet another popular form of sprite-scaling, most commonly used for first-person shooters on the PC in the 1990's.
While long past its heyday, sprite-scaling is still used today in polygonal 3D games, in the form of billboarding. This technique was commonly used for rendering trees in early 3D games, although this has become less common in modern games. It is still frequently used when rendering smoke and fire.