What is grid generation?
Grid generation goes by many other names including finite element modeling (FEM), and meshing. Regardless of what you call it, grid generation refers to the discretization of the domain on which a CFD or FEA solution is to be computed. For example, in the previous question about CFD the simulation of the aerodynamics of the Space Shuttle was mentioned. In this case, the air surrounding the shuttle is discretized. If you were to apply FEA to compute the stress in a bracket, the bracket itself would be discretized.