1) Yes, they are the three generations
our prophet says: "the best human are in my century, then in the second century, then in the third one, after that will come people that are not good"
In Arabic:"خير الناس قرني ، ثم الثاني ، ثم الثالث ، ثم يجيء قوم لا خير فيهم"
I found this hadieth in "saheeh wa dha'if al jame al sagheer" Al Albani
"صحيح وضعيف الجامع الصغير" للشيخ الألباني
2) of course they are al salaf al salih
"al salaf" means the Muslims who lived before us
and "alsalih" means good people
they are good people because they lived with our prophet ( peace be up on Him ), or they lived with some who lived with Him.. so they are fresh, and they didn't have a doubt about many things that we have about Islam now.
they understood Arabic language better that we, so they can explain al Quran and al Hadieth better than we.
والله أعلم