The first generation of alternative was exactly what it's name implied. It wasn't mainstream. It wasn't necessarily polished. It was often experimental. It took the heavy metal of the 70s and the hair metal of the 80s and turned the focus away from the antics of the band and towards the music the band played. Sure, everyone commented on how it was a generation of long, unkempt hair and flannel shirts. That's part of what mass media does, focuses on a trend and tries to make it a package that can then be sold. It took them four years, but after '95 they had managed to get "polish" of a sorts on the alternative scene.
The second generation of alternative was much like the first. In fact, a lot of the music that was any good was pretty much something that sounded like a first wave alternative band. There was also a surge of other genres at the time that started to shift focus off of alternative. Green Day gave new life to punk (along with Rancid, Social Distortion, et al). No Doubt brought ska to the scene (along with the Bosstones.. and ska is, in some ways, just punk with horns anyways). The "scene" was splitting up, going in different directions. But, while there was polish now on top of some of the music, the music still tended to be the focus.
The seeds of the destruction of alternative were labeled alternative themselves. Let's be quite honest here. Bush, The Goo Goo Dolls, Oasis, that band who's album was 16 Stone, these bands were not alternative. A lot of them weren't even American, but I'm not going to say that nationality can honestly determine one way or the other what happens to rock. Nevertheless, the British sound was more polished and mellow than what was coming out of the American west coast. The Goo Goo Dolls and their ilk (Soul Asylum, later, Creed) had a popular sound that, by definition of being a popular sound, was clearly not alternative. Nevertheless, stations which played "alternative rock" would play this mild, boring, acoustic shit. It was rock that your mother could like. Alternative wasn't about being liked by mothers, though, it was about expressing yourself, even if it meant flipping off the establishment, or even embracing it. You said what you want, and even if your opinion wasn't popular, if the music was good, that was good enough.
I can't even really think about the time from about '98 to now. The late 90s was overtaken by band image again. I liked Kid Rock, but he still was projecting an image at least as much as he was playing music. Limp Bizkit actually had an intertwined thing going, where their music was an extention of their image. Music was drifting towards outrageous, image-sold rock or rock/rap, or really mild stuff that was really too limp wristed to even hold anyone's attention for more than a couple months. Eventually the latter bands became *so* weak in the knees that they somehow made a black hole of dreary whinyness which started sucking people in, hence Emo was born. This black hole also ended up disintegrating the image based rockers, leaving a virtual wasteland if you're looking for anything that rocks with a pulse on the radio. Sure, there's a new song these days from the Chilis and from Pearl Jam, but it's too little. Hell, Pearl Jam probably contributed to the destruction of alternative just as much as Soul Asylum. They were more popular, and their music quickly turned from fiery (Ten), to melodic with less and less fire (most albums after Ten).
On a note which is only related in so far as that the times are the same, comedy seemed to take a nose dive pretty hard in a pretty similar fashion. A lot of the early 90s SNL actors have gone on to be pretty decent actors or comedians, or have died. Some of the early 90s musicians have gone on to still play music, but a lot of the good ones died. The comedy thing is thrown in my face virtually every day at work. We have a TV that we can watch when it's slow (which is 99% of the time). When my 22 year old co-worker comes in at 4pm, he always puts on MAD TV. Apparently he enjoys it, but I can't see how anything that claims to be sentient really could. By comparison, he'll chuckle or laugh once or twice at a MAD TV skit, but he cracks up hard if I show him any clips on YouTube of The State, which was a great sketch comedy show. The difference between the two shows is so great that it's almost as though they could be said to not exist on the same plane of genre. MAD TV is basically a bunch of "comedians" making constipated faces and acting outrageously while the other people on the show either ignore the "wackiness" of the character completely or act in a mildly uncomfortable way, while still not really having the guts to interact with the stupid character. The State, on the other hand, would actually do things like.. well.. comedy. They'd parody commercials and shows, they'd have some recurring characters who were ACTUALLY FUNNY, and not just.. ugh. They'd also have random sketches that didn't have anything to do with anything, it's just that someone had an idea that was funny and they would riff on it. MAD TV, on the other hand, lacks any imagination in it's characters, lacks any humor in any of it's sketches, and everything is well polished and ready for public consumption. The same could be said for mid-90s SNL to present time.
In summary... bring back the early 90s, please!