Most people here have it backwards I think 
The next generation starts once the first competitor releases their console. Everything else just doesn't make sense - what if Sony decides to push the PS4 back to 2015? Then next generation will start after 3 years of Wii U? And what if NextBox and Wii U both flop and MS / Nintendo launch their next consoles in late 2015, as well? We never had an 8th gen then?
The *transition phase*, on the other hand, does not end before all competitors have launched their products. So currently we are in generation 8, but we're still in the transition phase.
So when does a generation end? Naturally, once the first next generation console launched - but sales still carry on in the transition phase... that's why it's called transition. I think this is important because otherwise our look back at older generations will be quite skewed.
For instance today people think the PSX outsold the N64 3:1 but it didn't. It outsold it by like 2:1 (and both sold on par in the US for some years), it just had longer legs. If we don't take this into account we cannot accurately talk about the market in, say, 1998. Same goes for Xbox and Gamecube: It looks like the Cube sold on par with the Xbox but it really didn't - the Xbox was just discontinued very soon while the Gamecube sold more units after the 360 launch. You'd also think the PS2 had an 80% market share but it "only" had like 65% in late 2005. Or take SNES vs Megadrive: It looks like the SNES handily outsold the Megadrive but that's not true - it just kept on going after PSX / Saturn launch. The actual 4th generation was a head-to-head battle with Sega dropping out of the race sooner. And in the future people will say "all three 7th gen consoles sold roughly on par" but that's not true, the Wii handily outsold both the PS3 and Xbox360 from 2007-2010. If we don't want gamers in the future to think totally wrong things about these 4 years we have to look back at them in the right historical context.
So I'd say there's 4 stages:
- Start of new gen / beginning of transition phase 1
- Gen in full action / end of transition phase 1
- End of generation / beginning of new transition phase / start of next gen
- Total sales stop of a given generation
