So, do you think Pokemon has decline since its original conception with the Kanto Region and the first 151 Pokemon?
Of course. It's only natural for it to: nothing lasts forever, especially in a capitalist economy. Consumers want the latest thing, and when it stops being the latest thing then they want the next latest thing. For example, in five years time nobody will be throwing acid in anybody's faces over Edward vs. Jacob in the Twilight series, because we will have another literacy phenomenon.
If so, how?
You know something is popular in the wider world if there are jokes made about it on TV (on news shows, quiz shows, etc.), if there's merchandise for it everywhere, and if parents who weren't already into it know about it for the sake of their kids. For example, when the latest Transformers movie came out, people were making jokes about Michael Bay, stores were packed full of toys, candy, bedsheets, etc. and non-fan parents were trying to remember who is who on their shopping trips. But now that the next big movie is (for example) Tintin, that wider interest is now only present to die-hard TF fans like me.
Alternatively, do you think it started declining after Gen I, or at a later point?
I would say after the Johto games. IIRC, it was Gold/Silver/Crystal that really got everyone het up. New Pokemon? A new continent? Games in colour? The gaming magazines were full of it, comedians were making jokes about catchin' 'em all, and stores all across the UK were cashing in with merchandise. Then it all seemed to just fall quiet: Pokemon had had its day, and whilst some of the excitement was rekindled in gaming circles for LeafGreen and FireRed, the games only really mattered amongst the 'true fans' like those on PC.
Of course, the games are still capturing new players (if they didn't then none of us would be playing in the first place!) but it's not the worldwide icon it used to be. Most non-Pokemon fans don't remember anything past Pikachu and Ash Ketchum, the anime isn't shown all across TV, and merchandise is almost impossible to find.
I'm speaking from a British standpoint though, and we tend to get shafted when it comes to Japanese/American releases anyway. Maybe it's different for Americans and Japanese audiences, but this is my experience.