Actually, it's the processor makers that named the processors in generations. But Apple also used this term. Right now there's the problem that the PowerPC 970, according to IBM's listings, is a G3 or a G4 system (they don't talk about generations any longer). Basically, Motorola hogged the G4 term with their 74xx line of processors and defined that AltiVec was a part of the definition. Now that the 970 has AltiVec, that would make it a G4 processor (it's based on the Power4 processor, not IBM's G3 processors).
Apple probably won't name the PowerMacs 'G4' any more, as for _them_ it's a new generation. Still 'G5' would be the wrong term, processor wise. G5 is Motorola's 85xx line of processors, which are not used in desktop computers so far. (And not aimed at desktop computers, either.)