Originally Posted by
Gryson
There was a prototype in mid-1992, at least according to Kutaragi in the book Revolutionaries at Sony. It was completely different from what they had been working on with Nintendo.
Kutaragi says that from mid-1991 (Nintendo debacle) to mid-1992, he was completely consumed by the legal aspects of the case, but that his team secretly worked on a stand-alone prototype during that time.
At the mid-1992 meeting to decide the fate of the project (either continue trying to work with Nintendo, go solo, or give up), he presented the working prototype to Ohga and the other Sony execs, and that's when Ohga gave the go-ahead to proceed independently.
By early/mid-1993, they were showing real-time demos running on the hardware to large crowds of developers, including the famous T-Rex demo. Developers were speechless at how amazing it looked, but they said it wouldn't be possible to make games for. Jump to October 1993 - Virtua Fighter comes out from Sega in arcades, and suddenly developers understand the potential of 3D and begin to sign up with Sony.
Anyway, that's just a quick summary from the book. I highly recommend checking it out, considering how cheap it is.