Once you have chosen the type of key you want, and the strength of the key, press the ‘Generate’ button and PuTTYgen will begin the process of actually generating the key.
First, a progress bar will appear and PuTTYgen will ask you to move the mouse around to generate randomness. Wave the mouse in circles over the blank area in the PuTTYgen window, and the progress bar will gradually fill up as PuTTYgen collects enough randomness. You don't need to wave the mouse in particularly imaginative patterns (although it can't hurt); PuTTYgen will collect enough randomness just from the fine detail of exactly how far the mouse has moved each time Windows samples its position.
When the progress bar reaches the end, PuTTYgen will begin creating the key. The progress bar will reset to the start, and gradually move up again to track the progress of the key generation. It will not move evenly, and may occasionally slow down to a stop; this is unfortunately unavoidable, because key generation is a random process and it is impossible to reliably predict how long it will take.
When the key generation is complete, a new set of controls will appear in the window to indicate this.