The development and history of the Mii avatar was a long and arduous process, taking about 20 years to reach fruition. Famed video game developer Shigeru Miyamoto revealed information regarding such a process during his keynote speech at the Game Developers Conference in 2007. He stated that the current Mii design is based on traditional Japanese wooden dolls (known as “Kokeshi”), and also highlighted several stages of the Mii’s development process. The idea first appeared for the Famicom Disk System, but confusion over how the idea could be a game halted development. The idea appeared again with the Nintendo 64DD, where the player could edit a 3D character with a wide variety of clothes. Again, however, the project was never furthered. With the release of the Nintendo GameCube the idea was incorporated into Stage Debut, an unreleased game which planned to make use of the e-Reader and a camera attachment, but this idea was also canceled, as those at Nintendo feared there was not really a game to make out of it. The build Miyamoto showed during his conference showed a virtual Miyamoto dancing with some Pikmin upon a stage.
Around the time of the development of the Wii, a separate team at Nintendo were working on a friend registering software for the Nintendo DS. Within the software they were also developing a program where, in a manner similar to the Japanese puzzle game Fukuwarai, the player had to place the different parts of the face onto a drawing of a face. This team, however, was completely unaware of Miyamoto’s Mii concept. Eventually the software evolved to allow the player to edit the parts of the face in terms of size and position, in order to make the character look more like a specific person, and was soon shown to Satoru Iwata, president and CEO of Nintendo. The software was then shown to Shigeru Miyamoto as soon as possible, and eventually the team working on it moved to work with the Nintendo division EAD on the development of the Mii Channel. – [info from Wikipedia]
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