It's almost like the storyline of a videogame. The one-time champion, brought low by a powerful new rival, finally rediscovers his strength and stages a dazzling comeback.

Yet that's exactly what has happened to Nintendo in the past three years. Having helped to create the videogames industry in the 1980s, the company's name was synonymous with games - but that was little consolation when it spent ten years on the fringes of the industry, outclassed and outgunned by Sony's PlayStation.

Once, Nintendo was firmly in command of both the home console and handheld markets - but it lost out to the PlayStation in the home console category, allowing Sony to press its advantage into the handheld sector. When Sony announced the PlayStation Portable in 2003, Nintendo's share price promptly collapsed, analysts and shareholders alike fearing that the ship was finally sinking.

With the benefit of hindsight, it's clear just how severely the business world underestimated Nintendo. Today, its most recent handheld console, the DS, is on the verge of selling 100 million units - twice as many as Sony's PSP. In the home console market, too, Nintendo is back at the helm. The Wii is approaching 50 million units sold, while rivals Sony and Microsoft struggle to reach the 30 million mark.

Both the DS and the Wii have achieved something that the videogames industry has talked about longingly for years - true crossover into the mass market. Nintendo's consoles have not found success by selling to boys and men in their twenties and thirties. Instead they have carved out a new market - young girls, middle-aged women, pensioners, businessmen and everything in between.

The number of people playing videogames has skyrocketed in recent years, as people who have no interest in shooting aliens or crashing cars discover the new breadth of experiences and possibilities which the Wii and DS have introduced.

It would be easy to characterise this success as a stroke of luck. Certainly, Nintendo hedged its bets; company president Satoru Iwata admitted to me in 2005 that the development and launch of the Wii would cost only 10 per cent of the firm's cash reserves. Unlike Sony or Microsoft, for whom the failure of a console launch would be catastrophic, Iwata wasn't prepared to "bet the farm" on the Wii or the DS - if they failed, the company would simply go back to the drawing board.

In some markets, such as Japan, the DS has now probably reached a peak. The DSi, far from being revolutionary, is simply Nintendo cementing its position in the market. But despite this, the most exciting times for the console are yet to come. The growth of gaming is strong enough that even a deep recession will leave it unbowed - and huge markets such as India and China remain untapped. With component costs for the DS already low and continuing to fall, those emerging markets will become attractive fairly soon - giving Nintendo billions more consumers with whom to repeat its gaming miracle.

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