The example above, diagram 1-2, presents a very simplified version of a grid. Think of the extension cords as the grid. The grid connects the generator to the load. The control is really very simple in that the governor senses speed and attempts to maintain as close to a constant speed as it can.
With my generator, I may also have control of the voltage output, so I set the voltage for the US standard of around 120 volts. As the owner of the machine, I control the amount of load put on the generator. But if I put more load on the generator than it is rated for, what will happen? Without the generator’s having some form of protection against overloading, it is probable that the overload will eventually cause the generator to fail. However, there should be some protection built into the generator that will shut it down before it burns up.
Without going into an extensive review of the history of electric systems, I will say that the example above is not too different from how electric systems started. Cables were strung up on poles to deliver the electricity to lights and streetcars within a city. The size of the generator, or its capability to produce power, was designed to match the amount of lighting load expected to be connected to the cables. When the single generator ran out of fuel or broke down for some reason, all the lights connected to it went out.