My understanding is that this has some benefits over reference counting, though it it similar. Part of the issues with reference counting is that they are shared, meaning that it needs to be atomically incremented and decremented whenever you make a new reference (for instance in C++ if you return a shared_ptr or similar). Generational references though instead track something as a part of the value you pass around, meaning that it has better locality and doesn't suffer from contention.

Copying references is assumed to be more frequent than allocating and freeing, so this is a win.