A system of organizing
concepts in which
similar concepts are grouped together and placed "under" more general concepts. For example, the concepts CAT and DOG are similar, and are both more specialized than MAMMAL, which is more specialized than VERTEBRATE, and so on.
Generalization hierarchies are a common feature of knowledge bases (but not E2) and thesauri (but not Roget's.)
One special kind of generalization hierarchy is a hierarchy formed using the subset relation. The example above can be construed as such a hierarchy if we think of CAT as representing the set of all cats, DOG representing the set of all dogs, etc. Since every cat is also a mammal, CAT is a subset of MAMMAL.
Generalization hierarchies based on the subset relation are really useful if you are building a system that performs inference. If your knowledge base knows that CAT is a subset of MAMMAL (i.e., every cat is also a mammal), any inference rules that apply to mammals should apply to cats, too. But not necessarily the other way around!