This is an important question because would-be prophecy teachers have used their idea of generation to proclaim all kinds of erroneous predictions of the future. How many times in their confusion over God's Prophecy and Mystery Programs have we heard things like: With the creation of Israel in 1947-48 the prophecies of Matthew are being fulfilled. The Fig Tree is budding and this “generation” will experience Christ's return. Some thought a “generation” was 30 years, therefore, Christ would return in the late 70's. But the late 70's came and went with no return of Christ. So then, they said, well, a “generation” must be 40 or 50 yrs. But once again the late 80's and 90's came and went and still no return of Christ. Oooops. They would have to re-group and come up with other unbiblical theories they could use to pretend they were able to predict the future to get people to send them money so they could stay in business. This kind of prophecy teaching was a great detriment to God and His work and made dispensational theology a laughingstock for many people.
But there is a second problem with this mis-understanding of Matthew's meaning of “generation,” especially in Mat. 23:36 and 24:34. Understanding the word “generation” in the sense of a 30-50 year period, has caused most of historic Christianity to assume that the prophesies Jesus made had to have been fulfilled in the 1st Century AD. Therefore, it must be that these prophesies were fulfilled in 70 AD with the destruction of Jerusalem and the Temple. To make this fit, they had to spiritualize away Jesus' actual words in Mat. 24, where He described what would happen as universe quaking–the Sun and Moon darkened, Stars falling, Heavens shaking (Mat. 24:29), reducing them to a cheap metaphor for the much lesser rumble, ever so wimpy, destruction of Jerusalem by the Romans in 70 AD. So, this won't do either.
So, let's take a look at the word “generation” and see how Matthew uses it in his Gospel. Before we begin it is important to remember that any word, whether in Greek or English, gains its exact meaning based the context in which it is written. In the case of the word “generation,” it can refer to those who live at the same time over a 30-50 year period (Sense #1). But it can also refer to the descendants or posterity of someone or something not all living at the same time, to a race of people possessing similar characteristics, to a family history that spans over long periods of time (Sense #2).
One other thing to remember is the Bible's fundamental idea of lineage or generation that was introduced in the first pages of the Scriptures in Gen. 3:15. At the start of fallen humanity's history, we find two lineages or generations announced. One will be generated from the Seed of the Woman (ultimately the Lord Jesus Christ) and the other from the seed of the Serpent (Satan). The latter is the unrighteous seed or line of children of Satan, beginning with Cain. The former is the righteous seed or line of children of God, beginning with Abel. Both of these “generations” will continue throughout human history, Satan's unrighteous line always persecuting God's righteous line, but we are assured that while the unrighteous seed of the serpent will bruise the righteous seed of the woman, the seed of the woman will ultimately crush and destroy the seed of the serpent.
With all of this in mind, let's see how Matthew uses the term “generation:”
Sense #1: Meaning a 30-50 year period, those who live at the same time. Jesus and those who lived at His time.
Mat. 1:17: The 14 “generations” going from Abraham to David, David to Babylonian Captivity and Babylonian Captivity to Christ. This refers to a number of individual generations each made up of groups of people existing at that same time.
Mat. 11:16: Whereunto shall I liken this “generation.” The context refers to a time period that begins with John the Baptist and that is continuing in Jesus' ministry. Therefore, this refers to the people living in Jesus' day.
Mat. 12:41-42: Jesus says Nineveh, who responded positively to God and His Word in Jonas' day (ie., in Jonas' generation), and the queen of the south, who travelled great distances to receive God's teachings in Solomon's day (ie., in Solomon's generation) will judge the Vain Religious Leaders of Israel, who have rejected God and His Word and Christ's teachings in Jesus' day (ie., in Jesus' generation).
Sense #2: Meaning a race of people with similar characteristics but not living at the same time.
Mat. 1:1: Here, the “generation” is combined with the word for history. It is the historical generation of Jesus Christ that began with Abraham and extended through Joseph, for the most part consisting of people who were no longer living in Jesus' time.
Mat. 3:7: John the Baptist describes Israel's leaders as O “generation” of vipers. A viper is a serpent. This is referring to baby serpents born of the Serpent, Satan. The religious leaders claimed to be Abraham's children, belonging to God's “generation” when, in fact, they were really the children of the devil, belonging to Satan's “generation,” going back to Cain.
Mat. 12:39, 45; 16:4: Jesus refers to an evil, adulterous and wicked generation. It will help to see what Jesus is saying if we first understand what He is NOT saying. What Jesus is NOT saying here is that there are evil, adulterous and wicked people in the generation that Jesus is a part of in that day. What He is saying is that the leaders of Israel and, therefore, the apostate nation as a whole, belong to the unrighteous generation that began with Cain; they were children in the family of the Wicked One, Satan. Jesus' believing followers, however, do not belong to that unrighteous “generation” (even though they lived at the same time!). Rather, they belonged to the righteous generation that began with Abel, the Progeny of the Righteous One, the Lord Jesus Christ. He wasn't referring to natural lines of descendants on earth at that time but to spiritual lines of descendants, that began with Cain and Abel (Mat. 12:46-50).
Now with this overview what about our passage in Mat. 23-24? Verily, I say unto you, All these things shall come upon this “generation” (Mat. 23:36). And, This “generation” shall not pass, till all these things be fulfilled (Mat. 24:34). Most of historic Christianity has read these verses as referring to “generation” in the sense of #1 (in error) as referring to a 30-50 year period involving those who lived at that time. Therefore, these things must have been fulfilled with the destruction of Jerusalem and the Temple in 70 AD. But as we have seen this is not a required reading. Matthew also uses the word “generation” in the sense of #2 as referring to two races of people in God's sight, who share similar characteristics. An unrighteous line characterized by sin and death, whose father is Satan, beginning with Cain. And a righteous line characterized by righteousness and life, whose Father is God, beginning with Abel.
The only way to discern which meaning Matthew intended is by reading the word in its context. In the verses just before this passage, Jesus is decrying woes upon the Vain Religious System of Israel, explaining that the leaders of that day were the offspring, the children, not of the prophets but of those who killed the prophets. Of course, the fathers who killed the prophets are not people alive in the days of Jesus but people who had died centuries before. The leaders in Jesus' day were just a continuation of the long line of unrighteous, who always persecuted God's people. The leaders of Israel in Jesus' day belonged to that Satanic generation that began with Cain and stretched through Israel's history. Matthew's point here is their hypocrisy. They claimed to be children generated by God in the righteous line of Abel when, in fact, they were really children generated by Satan in the line of Cain, as seen in their killing of John the Baptist and their plotting to kill Jesus.
Then we read this: All these things shall come upon this generation (Mat. 23:36; 24:34) cannot be referring to the limited generation of people alive in Jesus' day. Rather, it must be referring to the “generation” explained in the preceding verse: The generation of Satan, the unrighteous line of fallen humanity, beginning with Cain, and to which Israel's leaders in 1st Century belonged to as well. That unrighteous “generation” will continue until Christ's 2nd Coming at which time it will be destroyed once-and-for-all. This was not so much a description limited to the people in Jesus' day, but was a warning to the disciples that this unrighteous line of Cain that Satan generated will continue persecuting them until the end of the Tribulation Period at Christ's 2nd Coming.
While context is enough to assure us that our reading is correct, it can be further corroborated by other things Matthew has already written about, specifically in two of the Parables. In the Parable of the Wheat and the Tares and the Good and Bad Fish, Jesus explained that the wicked and the righteous, the bad and the good, will coexist until Christ returns with His angels at which time they will be separated. The wicked and bad will be cast into the Lake of Fire and the righteous and good will be gathered into the Kingdom (Mat. 13:36-43; 13:47-50).
To conclude, when Jesus says this “generation” shall not pass, till all these things be fulfilled (Mat. 24:34), He is not referring to the people living on earth in Jesus' day but to people who belong to the “generation” of Satan, beginning with Cain, continuing through Israel's history and will not be destroyed until the very end when Christ returns with His angels to completely destroy it. All the cosmic signs and wonders Jesus talked about in Mat. 24, signs and wonders that disrupted the constitution of the whole universe, most certainly did not occur in the “generation” of people living at the time of Jesus', not even in 70 AD. They didn't need to witness them because Matthew wasn't using the word “generation” in the sense of a limited group of people who lived at the same time as Jesus lived but to Satan's “generation,” which began with Cain and has been coursing through human history, persecuting God's generation of the righteous that began with Abel, ever since. This wicked “generation” will continue through the Tribulation, all the way to the end, when Christ will return to utterly destroy Satan's unrighteous “generation” and casting it into the Lake of Fire while delivering God's righteous “generation” and ushering it into Israel's long-prophesied Kingdom of God on earth!