This is an interesting categorization. Probably the main thing that isn't quite so clear is what gets categorized as a "PC game" and what is "arcade evolution"? I would probably call Animal Crossing a PC game, since it is a life sim. However, it has never been available on PC. On the other hand I'm not sure how I would categorize games like 3D Mario and 3D Zelda. They don't feel like arcade evolved games or PC games to me. I guess they are arcade evolved, but they are just a further iteration away from pure arcade games?
Arcade games and PC games used to have very strong differences, but much like the definitions and borders of video game genres, it begins to blend into each other over time. That's why younger people are probably unable to tell a difference for the most part.
An arcade game had to be instantly understood to get players hooked, because otherwise people would just walk over to the next cabinet. This created a very different setting for software competition than on the PC where games could afford to have steep learning curves. A logical result of this is that arcade games needed very few buttons for their controls whereas games on a PC worked with the keyboard and had virtually no limit on the keys being used in games.
The example of Animal Crossing has similarities to Fire Emblem where you may feel inclined to assign it to the PC side because you associate the genre itself with the PC, but in both cases the games have a distinct feel to them because their approach was not to get a PC game to work on a console, but rather to adapt a PC genre by working from the premise of console game design, which means that only a few buttons cover all important functions while at the same time there's a focus on only the key ingredients instead of offering dozens of options. Another example would be the JRPG genre which is an adaptation of PC RPGs; while in a PC RPG the player had a lot of options for the character build, the stat and talent growth with level ups was significantly streamlined for JRPGs like Final Fantasy and Dragon Quest. In all examples in this paragraph I am refering to the very first game in each series.
3D games on console like Mario and Zelda can be called a further step away from pure arcade games. There's certainly some bloatiness and timewasting involved that isn't present in their 2D counterparts, so they aren't quite the same. I'd say that comes with the added dimension for gameplay that necessitates a bit more complexity in both controls and level design.
The classification is based on what console manufacturers went for. The Saturn and N64 should probably be a half-step between Arcade Evolution and Balance for the above mentioned reason that 3D games don't have the same purity as older arcade games in quite a few genres. Both the Dreamcast and GameCube had their manufacturers adjust to be more like PlayStation, so it would be correct to say that both major first and third party software efforts determine where a console is placed. I say "major" because you can find something of almost everything on modern consoles, but the key is where the emphasis is.