Computers small and inexpensive enough to be purchased by individuals for use in their homes first became feasible in the 1970s, when large-scale integration made it possible to construct a sufficiently powerful microprocessor on a single semiconductor chip. A small firm named MITS made the first personal computer, the Altair. This computer, which used Intel Corporation's 8080 microprocessor, was developed in 1974. Though the Altair was popular among computer hobbyists, its commercial appeal was limited, since purchasers had to assemble the machine from a kit.

The personal computer industry truly began in 1977, when Apple Computer, Inc. (now Apple Inc.), founded by Steven P. Jobs (Jobs, Steven P.) and Stephen G. Wozniak (Wozniak, Stephen Gary), introduced the Apple II, one of the first pre-assembled, mass-produced personal computers. Radio Shack and Commodore Business Machines also introduced personal computers that year. These machines used eight-bit microprocessors (which process information in groups of eight bits, or binary digits (binary number system), at a time) and possessed rather limited memory capacity—i.e., the ability to address a given quantity of data held in memory storage. But because personal computers were much less expensive than mainframe computers (the bigger computers typically deployed by large business, industry, and government organizations), they could be purchased by individuals, small and medium-sized businesses, and primary and secondary schools. The Apple II received a great boost in popularity when it became the host machine for VisiCalc, the first electronic spreadsheet (computerized accounting program). Other types of application software soon developed for personal computers.

IBM Corporation (International Business Machines Corporation), the world's dominant computer maker, did not enter the new market until 1981, when it introduced the IBM Personal Computer, or IBM PC. The IBM PC was only slightly faster than rival machines, but it had about 10 times their memory capacity, and it was backed by IBM's large sales organization. The IBM PC was also the host machine for 1-2-3, an extremely popular spreadsheet introduced by the Lotus Development Corporation in 1982. The IBM PC became the world's most popular personal computer, and both its microprocessor, the Intel 8088, and its operating system, which was adapted from Microsoft Corporation's MS-DOS system, became industry standards. Rival machines that used Intel microprocessors and MS-DOS became known as “IBM compatibles” if they tried to compete with IBM on the basis of additional computing power or memory and “IBM clones” if they competed simply on the basis of low price.

In 1983 Apple introduced Lisa, a personal computer with a graphical user interface (GUI) to perform routine operations. A GUI is a display format that allows the user to select commands, call up files, start programs, and do other routine tasks by using a device called a mouse to point to pictorial symbols (icons) or lists of menu choices on the screen. This type of format had certain advantages over interfaces in which the user typed text- or character-based commands on a keyboard to perform routine tasks. A GUI's windows, pull-down menus, dialog boxes, and other controlling mechanisms could be used in new programs and applications in a standardized way, so that common tasks were always performed in the same manner. The Lisa's GUI became the basis of Apple's Macintosh personal computer, which was introduced in 1984 and proved extremely successful. The Macintosh was particularly useful for desktop publishing because it could lay out text and graphics on the display screen as they would appear on the printed page.

These advances in software and operating systems were matched by the development of microprocessors containing ever-greater numbers of circuits, with resulting increases in the processing speed and power of personal computers. The Intel 80386 32-bit microprocessor (introduced 1985) gave the Compaq Computer Corporation's Compaq 386 (introduced 1986) and IBM's PS/2 family of computers (introduced 1987) greater speed and memory (computer memory) capacity. Apple's Mac II computer family made equivalent advances with microprocessors made by Motorola, Inc. The memory capacity of personal computers had increased from 64 kilobytes (64,000 characters) in the late 1970s to 100 megabytes (100 million characters) by the early '90s to several gigabytes (billions of characters) by the early 2000s.

By 1990 some personal computers had become small enough to be completely portable. They included laptop computers, also known as notebook computers, which were about the size of a notebook, and less-powerful pocket-sized computers, known as personal digital assistants (PDAs). At the high end of the PC market, multimedia personal computers equipped with DVD players and digital sound systems allowed users to handle animated images and sound (in addition to text and still images) that were stored on high-capacity DVD-ROMs. Personal computers were increasingly interconnected with each other and with larger computers in networks for the purpose of gathering, sending, and sharing information electronically. The uses of personal computers continued to multiply as the machines became more powerful and their application software proliferated.

By 2000 more than 50 percent of all households in the United States owned a personal computer, and this penetration increased dramatically over the next few years as people in the United States (and around the world) purchased PCs to access the world of information available through the Internet.