Stolen from someone who knows more than me or you.
The Saturn has two types of hardware transparencies: sprite-sprite and sprite-background. These two modes suffer from a number of restrictions, which is probably why they were not used so often.
- Sprite-sprite blending is always 0.5*a+0.5*b, which is why most places where it's used you get dull, smudgy graphics
- Due to the frankly idiotic way sprites are drawn you get artifacts where the same pixel is blended several times
- Sprite-sprite blending does not work properly only on VDP2-palettized sprites (this is also true for most VDP1 effects)
- Sprite-sprite blending is fairly slow (which is why the mesh option exists) and can not be used in high-resolution modes
- Sprite-background blending can blend in ratios of 1:32 to 31:1, but again, no increase in brightness.
- There are only eight different background blending settings available, shared by all sprites and in particular all RGB mode sprites share the same setting
- Not all types of sprites allow background blending
Since sprite-background blending is "free" many games use only that mode, and with a bit of effort it can be hard to tell you're only blending with the background. None of the restrictions are absolute showstoppers, but I'd say the increased rendering cost and limited blending options were the main reasons sprite blending wasn't used too often. Especially after Playstation designers started to use its more advanced blending options, using the Saturn's half-transparency would just have meant more unfavourable comparisons.
Now I'm done with this dumb argument.
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