Short story, the Nintendo DS succeeded in just about every way the Nintendo 64 faltered.
Long story, Nintendo got a little nervous about the rising development costs in games, because other developers were making bigger and better games appealing to a gradually narrowing audience. Now how much of that is true is debatable, but it can't be argued that Nintendo's steps to remedy this created an unbeatable counter to the PlayStation Portable.
Their first step was, instead of simply making "a more powerful Game Boy", trying something new with the system to alter the gameplay and get developers out of a rut. With the DS, the method was to add a touchscreen in between the d-pad and the buttons, while keeping the regular screen above it. The public prototype was codenamed the "Developer's System", or the "DS" for short (it was initially developed under the code name "Nitro" in-house; DS games still carry the "NTR" indexing code as a result, with the exception of games capable of using the DSi's additional features, which use "TWL" instead). But because of its two screens, the gaming press kept thinking it stood for "Dual Screen". Recognizing it was giving the system name recognition already, Nintendo made "DS" the official name.
When it was in development, Nintendo presented the device as a "third pillar" to complement the Game Cube and the Game Boy Advance, rather than claim that the DS was the latest iteration of the Game Boy hardware. There is some indication that this was a marketing ploy -- Nintendo did not want to potentially tarnish the positive image of the much-beloved Game Boy line if the DS failed to live up to expectations. Unnecessary in retrospect, and it didn't stop people from calling it the "Game Boy DS" anyway.
The PDA-like touchscreen also provided a more "intuitive" interface for game development. Rather than pressing buttons that manipulated some object on the screen, the player could simply touch what they wanted to. This fell into a new strategy of Nintendo pursuing so-called "non-gamers": people who would normally not play games and might be intimidated by being confronted with an array of buttons and a d-pad. Nintendo went on to market the Wii this way as well. Besides, die-hard fanboys could take solace in the console's overall layout, which was a Shout-Out to Nintendo's original handheld product, the LCD-based Game and Watch.
And they did. Non-gamers embraced games like Nintendogs and Brain Age, and gamers embraced games like New Super Mario Bros. and Mario Kart DS.
With the Game Boy Advance having owed much of its success to updated releases of SNES games, it looked early on as though the DS would do the same for Nintendo 64 games. This never happened in the end, though, with Super Mario 64 DS and Diddy Kong Racing DS being the only major examples. Exactly why this was the case is debatable, though the most common explanations are that Nintendo was making a push for more innovative games instead of ports with touchscreen gimmicks bolted on (a major problem with a lot of the system's early games), and/or Nintendo 64 games weren't really system sellers (as that system had a major marketshare decline).
Another thing that some initially believed was that with the PSP using discs, and the DS sticking with carts, that Nintendo was falling into the same trap as with the N64. There were four main reasons that wasn't the case.
- Carts have fewer moving parts, which meant less heat, battery drain, and loading times, something the PSP was notorious for. They are also more resistant to the rough treatment and wear mobile platforms must tolerate.
- Carts are small, and require basically no support hardware, making both them and the console they're used with more compact.
- Compression and the processing power needed to use it had evolved significantly since the N64 days, so the capacity wasn't that big of a problem.
- Of course, the most obvious reason was the fact memory prices had pretty much collapsed by the time the DS came out, making profit margins on affordable CD-capacity cart games possible.
So those advantages (which Sony seems to agree with itself due to the change in media with the PSP's successor), combined with lower development costs, made developers turn around and give huge support for the DS. It wasn't a total reversal, as developers also support the PSP, but it's definitely a redemption for Nintendo.
The DS also had a redesign to address problems noted with the first system, such as a dim screen light and the bulk. The so-called "DS Phat" is the biggest of Nintendo's handhelds since the original Game Boy, while the DS Lite is just about the size of the original GBA. Another redesign, the DSi, dispenses with the GBA slot entirely and slightly decreasing the battery length to increase the size of the dual screens, add an SD Card slot, slim its third dimension even more, add two cameras, and 256MB of onboard flash memory, all built-in. Games can now be downloaded through a DSi Shop Channel, much like the Wii's own Wii Shop Channel. Despite titles like Guitar Hero: On Tour which use the GBA slot, the DSi sold over half a million units in two days.
Yet another redesign, the DSi XL (LL in Japan), upsizes the handheld (slightly wider than the original DS) and was released in Japan in November 2009, Europe on March 5, 2010 and North America on March 28, 2010. Apparently, it's aimed towards the elderly and enables more people to watch the screen at once.
The 3DS, the successor to the DS which includes 3D technology, has its own page now. Just like the PlayStation 2 continued to exist well into the PlayStation 3's lifespan, it is expected that the non-3D DS family will stick around for some time after the release of the 3DS.
To date, the Nintendo DS is the second best-selling video game system of all time, with over 140 million units sold as of December 2010. It prints money.