Generator 101: What is the difference between AC and DC Generators?
An AC generator consists essentially of a long loop of wire called an armature that rotates between the poles of a magnet. The armature is rotated between the poles by the shaft of a fuel powered engine. As the armature rotates it cuts through the magnetic field that exists between the poles of the magnet, thus inducing a current of electricity in the armature. The armature supplies current to an external circuit through slip rings and brushes.
DC generators operate according to the same electromagnetic principals as the AC generator. The major difference between the two is the way in which the induced electromotive force is collected and transferred to an external circuit.
For an excellent review, please read the whole thing.