The 1540 is an "intelligent peripheral" in that it has its own MOS Technology 6502 CPU (just like its VIC-20 host) and the resident Commodore DOS on board in ROM – contrary to almost all other home computer systems of the time, where the DOS was loaded from a boot floppy and was executed on the computer's CPU.

The better-known 1541 is mechanically and nearly electronically identical to the 1540 but has a revised ROM that permits it to work with the C64 by slowing the drive down slightly.

However, it is possible to revert the 1541 into 1540 mode with a Commodore BASIC software command (OPEN 15,8,15, "UI-" : CLOSE 15) to permit better speed when used with a VIC-20.

Also, the relatively small memory of the VIC meant that the faster program loading times of the drive did not gain more than a few seconds compared to tape media.

Thirdly, almost all commercial software for the VIC-20 was sold on cartridge or cassette tape media, giving low incentive to buy a floppy drive.