I dont know how it did in Japan, but it was fairly popular in Europe and Brazil ye. I've always been under the impression that NES was most popular basicly everywhere in Europe except in the UK, but i dont have any hard data to back it up though so i cant say 100% sure (but i'm 99% sure hehe
).
I think it was most popular in Brazil, there they got alot of Mega Drive game ports to SMS that wasnt released anywhere else, and this was around early/mid 90's, when the system was pretty much abandoned elsewhere (Mega Drive/Genesis took over etc.). If i'm not mistaken, Sega Master System is still sold in Brazil. Tec Toy is still selling the Master System on their website, altho it looks like one of those cheap console clones, but i think you can use original Master System games on it too. Tec Toy was (or maybe still is) the official Sega distributior in Brazil if i'm not mistaken.
True, i dont think it was that popular in USA either. Sonic 1 is one of the most expencive and rare game over there, which is alittle wierd in my opinion (altho it was released fairly late in SMS's life, 1991). The USA version is also identical to the EU version, just that the US version got a different UPC sticker on the box. In Europe Sonic 1 is very common