The first one-armed bandit was invented by Charles Fey of San Francisco, California, U.S., who devised a much simpler automatic mechanism. Most assert that Fey invented the machine in 1887, however some believe that he may have conceived the machine in 1895. Due to the vast number of possible wins with the original poker card based game, it proved practically impossible to come up with a way to make a machine capable of making an automatic payout for all possible winning combinations. Charles Fey devised a machine with three spinning reels containing a total of five symbols – horseshoes, diamonds, spades, hearts and a Liberty Bell, which also gave the machine its name. By replacing ten cards with five symbols and using three reels instead of five drums, the complexity of reading a win was considerably reduced, allowing Fey to devise an effective automatic payout mechanism. Three bells in a row produced the biggest payoff, ten nickels. Liberty Bell was a huge success and spawned a thriving mechanical gaming device industry. Even when the use of these gambling devices was banned in his home state after a few years, Fey still couldn't keep up with demand for the game elsewhere. Liberty Bell machine was so popular that it was copied by many slot machine manufacturers. Thus in 1907, manufacturer Herbert Mills from Chicago produced a slot machine called the Operator Bell. By 1908 lots of "bell" machines were installed in most cigar stores, saloons, bowling alleys, brothels and barber stores. The original Liberty Bell slot machine can still be seen at the Liberty Belle Saloon & Restaurant in Reno, Nevada.
Sittman and Pitt of Brooklyn, New York, U.S. developed a gambling machine in 1891 which was a precursor to the modern slot machine. It contained five drums holding a total of 50 card faces and was based on poker. This machine proved extremely popular and soon many bars in the city had one or more of the machines. Players would insert a nickel and pull a lever, which would spin the drums and the cards they held, the player hoping for a good poker hand. There was no direct payout mechanism, so a pair of kings might get the player a free beer, whereas a royal flush could pay out cigars or drinks, the prizes wholly dependent on what was on offer at the local establishment. To make the odds better for the house, two cards were typically removed from the deck: the ten of spades and the jack of hearts, which doubles the odds against winning a royal flush. The drums could also be rearranged to further reduce a player's chance of winning.
Another early machine gave out winnings in the form of fruit flavoured chewing gums with pictures of the flavours as symbols on the reels. The popular cherry and melon symbols derive from this machine. The BAR symbol now common in slot machines was derived from an early logo of the Bell-Fruit Gum Company. The payment of food prizes was a commonly used technique to avoid laws against gambling in a number of states, and for this reason a number of gumball and other vending machines were regarded with mistrust by the courts. The two Iowa cases of State v. Ellis and State v. Striggles are both used in classes on criminal law to illustrate the concept of reliance upon authority as it relates to the axiomatic ignorantia juris non excusat ("Ignorance of the law is no excuse"). In these cases, a mint vending machine was declared to be a gambling device due to the fact that by (internally manufactured) chance the machine would occasionally give the next user a number of tokens exchangeable for more candy. Despite the fact that the result of the next use would be displayed on the machine, both courts ruled that "The inducement for each play was the chance that by that play the machine would be set to indicate that it would pay checks on the following play. The thing that attracted the player was the chance that ultimately he would receive something for nothing. The machine appealed to the player's propensity to gamble, and that is [a] vice."
In 1963, Bally developed the first fully electromechanical slot machine called Money Honey, although earlier machines such as the High Hand draw poker machine by Bally had exhibited the basics of electromechanical construction as early as 1940. The electromechanical approach of the 1960s allowed Money Honey to be the first slot machine with a bottomless hopper and automatic payout, of up to 500 coins, without the help of an attendant. The popularity of this machine led to the increasing predominance of electronic games, and the side lever soon became vestigial.
The first video slot machine to offer a "second screen" bonus round was Reel 'Em In developed by WMS Industries Inc. in 1996. In this type of machine, the display changes to provide a different game where an additional payout may be won or accumulated.
A person playing a slot machine purchases the right to play by inserting coins, cash, or in newer Ticket-In, Ticket-Out machines, a barcoded paper ticket, into a designated slot on the machine. The machine is then activated by means of a lever or button, or on newer machines, by pressing a touchscreen on its face. The game itself may or may not involve skill on the player's part — or it may create the illusion of involving skill while only being a game of chance.
The object of the game is to win money from the machine. The game usually involves matching symbols, either on mechanical reels that spin and stop to reveal one or several symbols, or on simulated reels shown on a video screen. The symbols are usually brightly colored and easily recognizable, such as images of fruits, numerals or letters, and simple shapes such as bells, diamonds, or hearts; newer video slot machines use animated cartoon characters and images of popular actors or singers (in the case of themed slot machines, as described below).
Most games have a variety of winning combination of symbols, often posted on the face of the machine (or available on a different screen, accessible by touching a button on the main touchscreen, on video slot machines). If a player matches a combination according to the rules of the game, the slot machine pays the player cash or some other sort of value, such as extra games.
There are many different kinds of gambling slot machines in places such as Las Vegas (as well as casinos modeled after those in Las Vegas, including those operated on Native American reservations). Some of the most popular are the video poker machines, in which players hope to obtain a set of symbols corresponding to a winning poker hand. Depending on the machine, players can play one, 100, or more hands at one time.
Multi-line slot machines have become more popular since the 1990s. These machines have more than one payline, meaning that visible symbols that are not aligned on the main horizontal may be considered for winning combinations. Reel slot machines commonly have three or five paylines, while video slot machines may have 9, 15, 25, or as many as 100 different paylines. Most video slot machines have a themed game, some of which feature graphics and music based on popular entertainers, motion pictures or TV programs (The Addams Family, I Dream of Jeannie, Happy Days, etc.) with a bonus round. Most accept variable amounts of credit to play with 1 to 15 credits per line being typical. The higher the amount bet, the higher the payout will be.
There are also standard 3 to 5 reel electromechanical machines, of various types. These are the typical "one-armed bandits". Since about 2005 there have been hybrid machines introduced, which combine elements of both video machines and traditional electromechanical machines.
One of the main differences between video slot machines and reel machines is in the way payouts are calculated. With reel machines, the only way to win the maximum jackpot is to play the maximum number of coins (usually 3, sometimes 4, or even 5 coins per spin). With video machines, the fixed payout values are multiplied by the number of coins per line that is being bet. In other words: on a reel machine, it is to the player's advantage to play with the maximum number of coins available.
As an example, on the "Wheel of Fortune" reel machine (created on the basis of the famous TV show “Wheel of Fortune” created by Merv Griffin), the player must play 3 coins per spin to be eligible to trigger the bonus round and possibly win the jackpot. On the Wheel of Fortune video machine, the chances of triggering the bonus round or winning the maximum jackpot are exactly the same regardless of the number of coins bet on each line.
Larger casinos offer slot machines with denominations from 1 cent ("penny slots") all the way up to $100.00 or more per credit. Large denomination slot machines are usually cordoned off from the rest of the casino into a "High Limit" area, often with a separate team of attendants to cater to the needs of those who play there.
Slot machines common in casinos at this time are more complicated. Most allow players to accept their winnings as credits, which may be "spent" on additional spins.
In the last few years, new multi-denomination slot machines have been introduced. With these slot machines, the player can choose the value of each credit wagered (the stake) from a list of options. Based upon the player's selection, the slot machine automatically calculates the number of credits the player receives in exchange for the cash inserted and displays the amount of available credits to the player. For example, a player could choose to wager one dollar per game on a nickel slot machine. This eliminates the need for a player to find a specific denomination of a particular slot machine; they can concentrate on simply finding the machine and setting the denomination once they decide to play.
Recently, some casinos have chosen to take advantage of a concept commonly known as "tokenization," where one token buys more than one credit. A casino can configure slot machines of numerous different denominations to accept the same type of token. For example, all penny, nickel, quarter, and dollar slot machines could be configured to accept dollar tokens. This significantly reduces a casino's inventory costs and coin handling costs. A tokenized slot machine automatically calculates the number of credits the player receives in exchange for the token inserted and displays the amount of available credits to the player. When a player chooses to collect his credits (by pressing a "Cash Out" button), the slot machine will automatically divide the number of credits on the credit meter by the value of one token and return the result to the patron. Any remainder is known as "residual credits" and cannot be collected. Residual credits must be either played or abandoned.