PC gaming would have taken over. It probably would have happened at a much slower rate, with no huge boon happening until maybe the late eighties or even nineties when more people started getting computers. But it would have remained pretty niche for a really long time, and I don't think it would be anywhere near where gaming as a whole is now. The home console is what brought gaming to the masses, and without the NES doing what it did I don't know if anyone else would have ever come close to doing the same. Maybe a few more Ataris would have come out, but none of them would have Mario on them, so they would just fade away.
Today you would see a lot less people playing games, and most of the games would be shooters. Adventure games would still be a lot more popular, maybe even surviving the decline we saw in the last decade.
It's hard to say where the smartphone market would be right now. Nintendo kind of paved the way for touch screen devices with the DS. Maybe if we did have them they'd have a lot less games on them. Or maybe we would still be using Blackberries with those horrible little mouse balls.
Currently playing:
Bloodbath Paddy Wagon Ultra 9
