Early NES games were comparable to Coleco and 7800 but quickly became "next gen" with titles that used MMC1 chips in cartridge. I wonder if it's not just the big N's marketing strategy that won over the industry. I wonder if it was also the willingness to pack in upgrades on cart instead of expansion modules.
There were a lot of factors, of course, but certainly being able to relatively inexpensively expand game capabilities with in-chip cartridges were an ace-in-the-hole for the both the NES and SNES. The primary factors though I believe were having the right types of games - starting with Super Mario Bros. - that really felt like something new and exciting, good timing (North America was ready to embrace videogames again) and marketing, and of course, the wonderful idea to lock down third party developers, which more or less left companies like Sega and Atari with the scraps.
As for the expansion module thing, it's important to remember that the NES had a plethora of crazy add-ons. While Nintendo themselves more or less stopped releasing them in North America after the initially bundled robot and light gun (they did license Bandai's sport's pad as well, of course), it was hardly a lost art by that point with third parties. They also were fairly agressive with the add-ons in Japan, including a computer add-on and real 3D glasses, which of course never made it out over here.