What defines a Generation?

[potato_hamster]

It's completely arbitrary. Someone decides and everyone else just goes along with it.

For example, let's just look at this chart:
http://www.huguesjohnson.com/features/timeline/generations.png

Why are both the Atari 2600 and the Atari 5200 considered part of the second generation?
Why are the Neo Geo and Neo Geo CD considered part of the 4th generation? The Neo Geo CD didn't play Neo Geo games, nor did it require the Neo Geo to work.
Why did the Sega Saturn start the beginning of the 5th generation, and not the Atari Jaguar?
Why is the Gameboy considered the 4th generation, and not the 5th or 6th?
If it has to do with successors, then why is the Gameboy Advance considered 6th generation, and not 5th generation?
Also, why are the PSP and NDS considered part of the 6th generation and not the 7th? Why was the Xbox 360 considered part of the 7th generation and not them?

The answer to all of those questions is this:

its 100% completely arbitrary.

The concept of a generation is a completely meaningless term. For every rule you can devise do determine what console belongs in what generation, there is an exception to it.