Alternating Current is generated as Alternating Current.
It could be generated as Direct Current, but Direct Current does not transmit as easly or for as far.
Some points needed for understanding this.
Electrical current is generated by moving a magnetic field through a conductor. The faster the magnetic field is moved the more current, the larger the magnetic field the more current.
Current is the amount of energy available for use. (Electical Potential)
The Earth has a negative charge, and the longer the wire is, the more the Earth induces a charge into the wire.
Almost every conductor available converts some of the electricity running through it into heat. The more efficient the conductor the less heat generated.
With Direct Current this means more power is needed to over power the induced charge. This is done by raising the voltage on the wire. The only way to raise the voltage on Direct Current systems is to push the electicity harder, spin the generators faster or use heavier magnets. Raising the voltage also raises the amount of current running through the wire, raising the amount of heat generated in the wire. At some point, the wire cannot handle this and breaks down. This turns out to be roughly a mile or so if I remember correctly.
Moving electric fields also generate magnetic fields, and the High Voltage electric fields generated by direct current transmission lines would generate quite a stir in todays society.
With Alternating Current voltage can be changed by coupling the magnetic field generated by the moving electic field with another transmission line. Since the voltage on an AC line is fluxuating, it generates a fluxuating magnetic field. The fluxuating magnetic field will induce a fluxuating electric field in another conductor.
In other words take a coil of one voltage AC and couple it with a different coil and a current will be generated in the second coil. The ratio between initial (Primary) coil and the secondary coil determines the voltage induced in the secondary coil. For simplicities sake 10 loops on primary at 100 Volts coupled with 20 loops on the secondary coil induces a current of 200 volts in the second coil. (lower amps though)
This principle can be used to raise the voltage in the transmission lines to any desired level. Making it easy to overpower the induced charge from Earth's potential. Allowing for transmission lines of great length.
Alternating Current just shakes the charge field without really pushing electrons around a loop. The electricity you use at your house is the difference between two wave forms. The actual electrons used stay close to where they are used, but they are pushed and pulled by the electric field on the wire.
The electric field is what travels at the speed of light, electrons travel much slower.
Similar to a pipe with water in it. When you start pushing the water at one end it comes out the other, but the water you are pushing is still close to where it started.