What is orthophoto generation and orthophotography?

An Orthophoto or orthophotograph is an aerial photograph geometrically corrected ("also known as ortho rectified , can be done by service providers ie Orthophoto rectification service"). Unlike an uncorrected aerial photograph, an orthophotograph can be used to measure true distances, because it is an accurate representation of the earth's surface, having been adjusted for topographic relief lens distortion, and camera tilt.The concept of geo-rectification services/georectification services comes under Orthophoto rectification service.
Orthophotographs are commonly used in the creation of a(GIS) Geographic Information System and is useful in GIS mapping services. Software can display the orthophoto and allow an operator to digitize or place linework, text annotations or geographic symbols (such as hospitals, schools, and fire stations). Some software can process the orthophoto and produce the linework automatically.

An orthophoto is an aerial photograph planimetrically corrected, thus an orthophoto is generated Orthophotographs have the positive attributes of a photograph such as detail and timely coverage, and the positive attributes of a map including uniform scale and true geometry. This enables orthophotographs to be used in their primary role as a backdrop on which map features can be overlaid. Orthophotos represent the primary use of remote sensing
imagery.

Orthophotos are now created by scanning aerial photographs and converting them into a raster image file format. A digital terrain model is added as a means of collecting ground points to indicate the changes in elevation. When control points are identified on the aerial photos, stereo models are developed and geometric distortions are estimated. The image is rectified and georeferened using mathematical models of photogrammetry to remove tilt, terrain, atmospheric and other digital image distortions.
Multiple photographs can be analyzed, corrected, and mosaicked / mosaicing all at once by a process called “bundle adjustment”, in which interrelated sets of equations are used to find a globally optimal set of corrections across all photographs. If a photo is black and white, each pixel is assigned a single numerical value corresponding to its light intensity. Color orthophotos are handled in an analogous way by transforming a vector of light intensities for different color bands into a single number. After the model has been scanned, the film is then developed as a negative orthophotograph, and it would usually be brought to the required scale by appropriate scaling or setting of the stereomodel and can be enlarged or reduced by the user if the scaling has not been adjusted after being scanned.

Reference : Wikipedia