Sega channel was Sega's attempt at offering a subscription service to play games. After signing up for Sega Channel, the cable company would come out and setup a large cart (basically a modem that fit in your Sega Genesis) so that games would be able to be played over the service.
The service cost $14.95 a month in most areas with a $25 dollar install/activation fee. The carts were made by both Scientific Atlanta and General Instrument. Some user interface code and menus were developed by Foley Hi-Tech Systems.
The service worked by the Sega Channel modem connecting to a server and updating the games list. Once a month this list would change and would contain both new and older Sega Genesis games. The games were all broken down into categories and were easy to browse through. Once a game was chosen it would first download and then play.
Other features the service offered was special editions of games like Earthworm Jim and a section to play games that were not released in North America, such as Pulseman and Mega Man: the Wily Wars. Contests were often held that offered prizes such as BMX bikes or special copies of new games.
The service also allowed players to use cheat codes in a way similar to a Game Genie. The cheat code system was built into the service itself.
The service also involved downloadable demos. These were either playable for 15 minutes before dropping the player back to the main menu or limiting features - like only having two selectable fighters for Primal Rage.
There were some issues that came up with some games that the Sega Channel had to devise ways to get around, examples include splitting Sonic 3D Blast in half to fit the download size. Once the player completed part one, they were given a code to enter so they can finish the game in part two. Another example of this workaround was limiting the playable characters from twelve to six on Street Fighter II Special Champion Edition.
The service ended on July 31, 1998, around the same time as the Sega Genesis was retired as a system. The "cart" units were supposed to be returned to the cable companies after termination of service, but there are some that are still in the hands of collectors to this day.