Usually on consoles the backgrounds are actually very small tiles, like 8x8. They probably use some kind of "brush" system in their map editor to make bigger groups of tiles from smaller ones.

This way they can easily place similar looking objects in several places even though they''re made up from lots of small tiles.

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Small tiles are used because they''re easy to re-use and because consoles work with tiles (8x8 in most of the old systems.) siaspete is right about the grouping: For example, Sonic the Hedgehog (for the Sega Genesis) has levels composed of rather large blocks (about 1/4th of the screen in size if not more.) Each block is further defined by a bunch of 8x8 tiles which the hardware works with and data for slopes, friction, etc.

I think a lot of games just make up their levels out of 8x8 tiles directly, however, maybe with some larger multi-tile objects in the background (or sprites.)

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Bart