As popular gaming moved from the arcade into the living room, the stage was set for a less frantic, more leisurely presentation of the action -- gaming "off the clock."
No longer was there a need to kill the player off as quickly as possible, in order that he (or the people waiting in line behind him) insert another quarter.
It became feasible and even desirable to give the player a break from the action, some time to thoughtfully explore his environment, rather than race him towards inevitable destruction.
Thus were born a number of popular gaming genres, including the adventure game and the flight simulator.
The adventure game popularly began in 1978 with Warren Robinett's breakthrough game for the Atari 2600, entitled, appropriately enough, Adventure. 1980 saw the release of the more sophisticated and seminal Rogue and Ultima.
This genre moved through the popular classic Pitfall and the unforgettable catastrophe E.T. (both, 1982). The player now had his leisure -- his world was now basically open. Pac-Man had broken out of his labyrinth -- and found a real world waiting for him outside.
A seemingly distant genre, the flight-simulator, popularly began in 1980 with subLOGIC's appropriately-titled Flight Simulator, later licensed to Microsoft. These games were groundbreaking for the sense of freedom -- and what better sense of freedom than flying through the open air? Their basic problem was that the air was empty, so there was literally everywhere to go and nothing to do. The game was the movement alone.
Movement alone is a fantastic concept for gaming, of course, as has been well demonstrated by recent parkour-inspired games (Assassin's Creed, Mirror's Edge), and the closely-related genre of sports games. Also, exploration is the fundamental gameplay concept of open-world games. So, even while the early flight simulators were devoid of narrative or action, they were perhaps the first pure expression of open-world joy.
Then there came Elite (1983), which synthesized these emerging forces, and in so doing shifted the paradigm.
Elite was outstanding in many ways. Its graphics engine was original and groundbreaking: wireframe 3D graphics with hidden-line removal was a big deal back then. The auto-generation of the universe was brilliant, and its combat was clever (although dogfighting had already been incorporated by subLOGIC/Microsoft's Flight Simulator back in 1982). Its economy was a game just by itself, and it had a rich gameplay all around.
But Elite was truly profound because it presented a game-world space and a freedom of movement and choice that for the first time felt real and unbounded. The game-world no longer appeared to be a closed labyrinth or a hilly continuum, but was now an open universe -- and so the game-world metaphor began to operate on a new level.
With The Seven Cities of Gold (1984), this was of course the birth of a genre: the trade/exploration/combat/adventure sandbox, typically in space or at sea (key metaphors of freedom). The successors are far too numerous to list, but they include: Starflight (1986), Pirates! (1987), Star Control (1990), Privateer (1993, and following), X (1999, and following), Freelancer (2003), Darkstar One (2006), SpaceForce 2 (2007).
In the whole history of computer games, there have been only two other innovations which are on the same level as this moment: 1) the explosion of multi-player; and 2) the paradigm-shift from 2D "platform" to 3D world -- the latter already anticipated by Elite's cockpit view, though this was already done in the popular arena by the arcade game Battlezone (1980).
(Technically speaking, Jim Bowery's 1974 game Spasim was the first multiplayer 3D combat, but as it ran on a PLATO network mainframe, its audience was relatively small and specialized.)
However, it would be about sixteen years before game designers began to use the term "sandbox" to describe this kind of free-form play. Nevertheless, the concept of the open game-world is essentially the same, from Elite all the way to Assassin's Creed, Spore, or GTAIV.