A custom segment allows you to customize the data you want to appear in your segment: for example, a specific group, a specific type of Workplace members, the choice is yours.
For example, you want to create a segment with only members of the Marketing department of your Corporate group on Workplace. Select the group then the Marketing department.
Generate segments allows you to automatically generate all segments of a dimension.
For example, you want to create all segments of the Locations dimension. You'll see all the places saved by your members on their Workplace profiles.
Be careful that the profiles of your members are correctly completed.