From Sega Retro

VGM (Video Game Music) is a ripped sound format (like the de facto obsoleted GYM format, but unlike the SPC or NSF formats, which are actual dumps of the sound data found in the ROM and thus actual pieces of software emulated on the fly by the media player) originated on with the aim to support a wide range of sound chips encountered on various video game consoles and handhelds.
It originally supported only the sound chips found in the Sega Master System and Game Gear, which are the SN76496 (PSG), and the YM2413 (FM, found in the Japanese Master System); version 1.10 of the VGM format introduced the YM2612 (FM chip found in the Genesis and in some arcade boards) and the YM2151 (FM chip found in many arcade boards such as OutRun).
By version 1.60 (developed by ValleyBell, thus not an official revision of the format) many other chips are supported, including several ones from non-SEGA gaming machines (such as the YM2610 used by the Neo-Geo), but also including the PCM found in the Sega CD and the PWM found in the 32X.

The normal file extension is .vgm, but files can also be Gzip compressed into .vgz files. Technically, .vgz files should be named .vgm.gz, but because some popular operating systems' file managers cannot handle file name suffixes that themselves contain a dot, .vgz is used in order to launch a VGM player (e.g. Winamp with the proper plugin) and not an archiving program.

External links