For some systems, such as the Super NES (SNES), there existed a development kit, which consisted of specialized hardware. I believe this kit allowed the developer to present recently assembled machine code to the SNES without needing to burn EPROMs every time it needed to be tested, and also to insert breakpoints, etc. in the SNES itself.
This was just to give some context, and this might not even be accurate regarding the SNES.
What systems existed for arcade systems? Just to make this question specific enough, I'm limiting it to CPS-1, which was used for many games, including Street Fighter 2.
Did the developers have a similar system to the SNES development kit, a CPS-1 development kit?
I don't know, but if I had to imagine, I would imagine that yes, they had a similar system to the SNES development kit.
I would assume the developers could write code on either a normal PC, or a Unix workstation, and either cross compile/cross assemble if they used x86. Perhaps slightly less work to implement this on a Unix based workstation for the 68k? They would also need features to debug their code, again akin to the SNES development kit, obviously they couldn't actually run the code locally on the PC/Unix workstation -- the graphics chipset of the CPS-1 would be much too powerful to emulate. However, an alternative solution could be to have an expansion card that implemented a complete CPS-1 inserted into the PC, or Unix workstation which includes the chipset.
What did they actually use, for the CPS-1?
Does there exist some kind of list to show what development solutions existed for various consoles and arcade machines? I'm sure that would be of interest to many.