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Machine Wars was a line of Transformers toys released in 1997 as a Kay-Bee Toy Works exclusive. Apparently, the line was an early attempt to bring vehicular characters and popular names back into Transformers after the success of Beast Wars revived the brand. Only one wave of figures was produced, and memory of the line has mostly faded. It is a rare example of a micro-continuity (and, specifically, an implied continuity) which nevertheless had a full (albeit very small) toyline of its own.
Now part of G1 continuity! So where do Animorphs fit in?
Fiction[]
"Machine Wars" placement within the larger fiction is an open-ended question. There is no form of accompanying fiction, nor even a story-establishing packaging blurb to set the stage. The on-package bios establish that ten of the twelve toys are blatantly returning Generation One characters in new bodies. (The errant two are Megaplex and Hubcap, the latter of whom shares a name with but is otherwise nothing like the Generation One robot of that name.) As such, many fans have taken to thinking that Machine Wars is part of the Generation One universe after Generation 2, since this was its characters' first appearance as toys since then, and the Transformers franchise had not yet explicitly rebooted continuity nor established the concept of a multiverse.
This placement is supported somewhat by Megatron's bio, referring to him taking to the skies "again", likely a reference to the unreleased Generation 2 "ATB Megatron" toy. Years later, the idea would find more traction in Takara's controversial "official timeline", where Machine Wars indeed follows Generation 2 in a grand conglomeration of all Transformers continuities. However, this has little bearing for fans of Western Transformers continuity.
Another hint of story progression within Machine Wars itself comes from Thundercracker's bio. Where his Generation One bio had established him as being unsure of the Decepticon cause but willing to follow orders, his Machine Wars function is "Rebel Warrior", and he's described as believing in the Decepticon cause, yet "rebellious among his own ranks".
"I've got a hint for you too."
While nostalgia has fueled a return to old Transformers franchises in new fiction and toys, Machine Wars has been largely overlooked. One notable exception is the bio for the e-Hobby-exclusive black Starscream, which refers to his Machine Wars form in the past tense. Also, the Genesis art book contains a portrait of Machine Wars Starscream. The artist embedded story information into the scene, placing Starscream on the dais where he was once crowned and adorning him with the same purple cape. But the setting glows golden, a reference to the post-Rebirth Golden Age, and Starscream brandishes the presumably defeated Galvatron's torn-off cannon. The picture was intended to be a sequel to a piece of the artist's own fan art.
Toys[]
It is speculated that the line was a "stopgap" measure due to very early ideas (which Hasbro ultimately did not go through with) for a Generation One revival having been told to fans at BotCon 1996 by the Hasbro representative there, Anthony Gaud, and Hasbro putting together a quick line to capitalize on the rapacious hunger of the fandom for vehicle-form toys.
The line is entirely old molds: four small molds that had been originally developed for Generation 2 but were canceled with the line, and four larger toys released in the second-to-last year of Generation One in European markets. The card artwork is often cited as a testament to rushed production; many of the packages have character art from different toys, altered to resemble very vaguely the toy inside the package.