For a COBOL program the generate process is a compile. For other types of elements other processes take the source and create load modules, other output modules or simply scan (as in JCL, and procs).
Move, add, and update implicitly process (generate) an element when the change is made to the source. Under certain circumstances, it is necessary to recompile/reprocess an element when there are no changes to the element itself. The generate action exists for this purpose.
As an example consider a COBOL source program containing copy statements. When a change is made to a copybook used by the program, the program should be recompiled. This is done by generating the COBOL element after updating the copybook.
Generate does not alter the version and level and does not change the source. Only the outputs from processing the element are changed.