This was my second computer. It had a great BASIC interpreter, with some really nice graphics and sound capabilities. (And a VAST improvement over the Intellivision ECS I was coming from.) By contrast, you had to use a series of PEEKs and POKEs to do the same things on a C-64. While it was mostly hardware compatible (it worked with all the serial port peripherals the other Commodore machines could use), it lacked a way to expand the hardware like you could on the C-64. There was no way to add a modem, for example (that I was able to find). Software-wise, it wasn't really compatible with anything, which was a shame.
I've read somewhere that the C-16 was supposed to be a replacement/upgrade to the VIC-20, but it didn't sell. The one I got my parents won at some condo presentation. It's a shame, too, because the C-16 had the makings for a great computer. But it's limited RAM and lack of compatibility really hurt it. I think I gave mine away to Goodwill as I was moving out of my parent's house. Nowadays, I'm regretting that decision.