I'll give a little bit here.
Okay, we're in the 7th generation of consoles here. Going back, there's 6th- Gamecube/Dreamcast/PS2/Xbox, 5th- N64/Playstation/3DO/Atari Jaguar/Sega Saturn, 4th- MegaDrive(Genesis)/SNES/TurboGrafx-16/Neo Geo, 3rd- NES and Sega Master System, and then there's a sea of Ataris and consoles nobody's heard of in 2nd and 1st. Also Pong.
If there are consoles in there you've never heard of (and I guarantee there are), it's because they failed.
Because of the terrible quality of the consoles and games in the second generation, the industry crashed in North America. Then the NES came along.
As for the technical stuff- games are funded by publishers (EA, Activision, 2K Games, Squeenix occasionally, etc.) and developed by none other than developers. Then, just like everything else, they're completed, marketed and manufactured, then sent off and sold. And now, with things like XBLA and PSN and Steam, indie developers can have their games published without having to pay for marketing and manufacturing.
And if you want to read up on it all, just head over to Wikipedia. If you want to know more about the industry today, get something like Game Informer (they usually have some history pieces and interviews with figures) and start watching Extra Credits if you're not already. Yahtzee's articles can help too. Same with the Escapist's weekly issues.