OVER THE PAST 35 YEARS, light-emitting diodes (LEDs) have brightened everything from road signs to digital clock displays. Now, they're poised to penetrate the $15 billion video game market. Nintendo of America Inc.'s long-awaited Virtual Boy, to be launched on Aug. 14, and priced at $180, uses bright red LEDs against a black background to create three-dimensional images of sports, pinball, and shooting games.

As you gaze into Virtual Boy's headset, each eye stares at a separate display assembly, known as a scanned linear array. It consists of a thin column of 224 LEDs, reflected in a mirror that vibrates to create a rectangular image. By staggering the scenes projected to each eye, Virtual Boy produces startling effects--including a tennis-game shot from the player's perspective.

Reflection Technology Inc. in Waltham, Mass., built the arrays and has also designed them into a wireless, handheld fax machine. You can stare into a viewfinder to read a fax--again, red on black--or zap it to a printer. Reflection, which is partly owned by Nintendo, has tested a prototype with GTE Corp. and hopes to release a product in October for less than $400.

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