The Sega Genesis was built with backwards compatibility in mind. Sega wanted to give their customers the ability to play games from their 8-bit console on the new 16-bit hardware. Unfortunately, the Genesis' cartridge slot is of a different size and shape than the older Master System cartridges, rendering native backwards compatibility, while technically possible due to the hardware design, a practical impossibility necessitating the Power Base Converter, a separate piece of hardware which fits into the Genesis' cartridge slot.
The Power Base Converter actually contains no Sega Master System hardware, since the Genesis was designed with backwards compatibility in mind. Essentially the Converter works as a card-reader does, allowing the Master System hardware within the Genesis to process the data within the Master System game. The device is not compatible with the re-designed Genesis console (known as the Mega Drive 2 in Europe). A second version of the Power Base Converter, the Master System Converter II, was released to address this issue, but only in limited numbers and only in Europe.