That is actually a very good understanding of AC generation. You are almost there. The only slight correction would be in the way that magnets polarize a loop of current. It is true the magnetic fields affect electrons, but it's not actually just a magnetic field, it is a change in a magnetic field which affects electrons. So having a magnet just sitting next to a wire will do nothing, the key is in the movement. And this changing magnetic field is what causes electrons to move. In this way, it doesn't really matter whether it's one end of a magnet or the other, because the change in the magnetic field will either be getting stronger or weaker (increasing or decreasing). It's the increase or decrease that dictates how the electrons will move.

And you are completely right, a voltage difference is set up by having extra charge on one end and not as many on the other end. The changing magnetic fields are what accomplish this. They dictate that the electrons in the loop of wire move (on average) in one direction (and then in the other in an AC circuit). This collective movement can be thought of as being like a crowd of people all swaying back and forth. If every one is in unison, then at any given time one area will look like it has more people in it, because everyone is swaying in that direction.

So the changing magnetic fields cause the electrons in a loop of wire to move. This movement causes them to bunch up at one end of the wire, and be more scarce at the other end. That is what sets up the voltage and that is what allows for AC circuits to drive the electronics we know and love.

According to your question, you mention the following phrase, in which you guess: "magnets lines of force polarizes the two ends of the coil, leaving one end of the coil positively charged and the other negatively charged"

Actually, this is not the case. An *electric field* would polarize the coil in the way you described, but the magnetic field does not interact with stationary electrons at all.

The way to understand AC voltage generation is first to "understand" Faraday's law which, in words, indicates that a voltage difference is induced in a coil of wire when the total amount of magnetic flux passing through the area enclosed by the coil *changes in time*. What typically makes this difficult to wrap ones mind around is the fact that nothing happens when things are stationary, so you cannot "pause" the rotating coil in your mind and do a (static) force balance to understand why the electrons are inspired to move.

I suggest reading these two pages for a nice overview of how and why this process works:

Now the *real* question of *why* Faraday's law holds is a question for a physics PhD!

Okay, I was wondering what you meant by "AC". You mean Alternating Current.

A changing magnetic field generates an electric field, and vice-versa. The polarity of the magnetic field (which has field lines), and the change in that polarity, determine the corresponding direction of the electric field lines. These electric field lines are what drive the current in your wire.

In an AC generator, you have a magnet that is swinging around in a circle, thus producing a cycling magnetic field. The fact that the magnetic field is changing one way, and then starts changing the other way on the other side of the cycle to get back to where it was, means that the electric field is doing the same thing: alternating. Thus, the electrical current must alternate along with the electric field.

“Does voltage exist between the two terminals?”
Voltage exists but it is alternating along with the alternating of the field. A static magnetic field generates no electric field and thus no current. It is only because the magnetic field is alternating that there is any current at all.

You also don't need terminals. A loop of wire with a magnet swinging through the loop will have current flowing through the loop in a direction determined by the movement of the magnet. This is actually how an AC generator works: you need a loop or otherwise the electric charge will get stuck on one side like a capacitor.

“That potential difference in the generator is between the two sides of the coil, but how is this established?”

It's more that the potential is moving in a circle - and then goes the other way when the field reverses.

“My understanding of potential difference tells me that for there to be a difference in potential there has to be un-even amount of electrons between two points, where one point possesses too many, and the other possessing too little, thus there is a potential difference between the two, in which the electrons will desire to travel from the higher potential to the lower potential point.”

Yeah, like I said, what you're thinking about is direct current, i.e. DC. In DC, you have a potential difference that goes in one direction, and current that flows in that direction. In AC, the direction of the potential alternates, as does the current, hence the name. The force responsible for the current requires that the electricity be flowing in a loop, not from a start point to a destination. Without a loop, you will, as you say, get all of the electrons on one side, which means that you'll quickly run out of juice as the field created by the electrons themselves will overpower the electromagnetic process that makes AC work.