The LCD shutter glasses rapidly alternate between the left and right lenses being opaque, used in tandem with two different alternating images flashed from the TV synchronized with the switching of the 3-D Glasses to create a natural stereoscopic 3D effect. The Master System glasses can only be used in the original Master System, since it hooks up directly to the card port not found in the Master System II. This system allows 3-D graphics in full color. The technology takes advantage of the interlaced video output of contemporary CRT televisions, displaying the left image in the top field and the right image in the bottom field. Only eight Master System games are 3-D compatible.
Source: Wikipedia, "Sega Master System", available under the CC-BY-SA License.