In the early 1980's, North American and Europeon home computer/game console designers wanted to bring the "arcade look" to the home consumer, but hardware prices, design considerations, etc etc made this too expensive. So, compromises with the hardware were made.
The Atari 5200, 7800, Atari 8-bit computers, and the Commodore 64 all employed a video chipset that was able to render a very respectable (for the time) display of 320x200 ... but with only two colors. Due to memory limitations, the horizontal resolution had to be cut half to handle multicolor backgrounds and sprites. This left a 160x200 resolution, and on your standard 4:3 display, this stretched the pixels to be twice as wide horizontally. This was known among developers and users as "fat pixel mode".
Think of it as Bizarro-world widescreen.