The generation and version numbers are in the form GxxxxVyy, where xxxx is a 4-digit generation number (0001 through 9999) and yy is a 2-digit version number (00 through 99).
The system automatically maintains the generation number. The number of generations kept depends on the size of the generation index (the LIMIT).
The version number lets you perform normal data set operations without disrupting the management of the GDG. For example, if you want to update the second generation in a 3-generation group, replace generation 2, version 0, with generation 2, version 1. Only one version is kept for each generation.
You can read in more detail here in the DFSMS Using Data Sets