$X$ Banach space. In $B(X)$, we can define a Lie product $[ , ]:[T_1,T_2]=T_1T_2-T_2T_1$ for any $T_1,T_2 \in B(X).$
Let $\mathcal{L}$ Lie Algebra. $\mathcal{L}^1=\mathcal{L}$ , $ \mathcal{L}^2=[\mathcal{L},\mathcal{L}]$, $\mathcal{L}^3=[\mathcal{L}^2,\mathcal{L}]$, $\mathcal{L}^n=[\mathcal{L}^{n-1},\mathcal{L}]$. Then;
$\mathcal{L} \supset \mathcal{L}^2 \supset \mathcal{L}^3 \supset ... \supset \mathcal{L}^n \supset ...$
If $\mathcal{L}$ in nilpotent then $\mathcal{L} \supset \mathcal{L}^2 \supset \mathcal{L}^3 \supset ... \supset \mathcal{L}^n= \left\{ 0 \right\}$
What does "Algebra $\mathcal{A}$ is generated by nilpotent Lie Algebra $\mathcal{L}$" mean?
I think this means that $\mathcal{A}= \bigcup \limits_{n=1} {\mathcal{L}^n}$. Is this true? If my idea is true, then $\mathcal{A}=\mathcal{L}$. I do not understand it.
Without more context I cannot be certain, but I don't think your interpretation is the one your author has in mind.
Given an associative algebra (like a Banach algebra), say $\mathcal{A}$, one gets a Lie algebra using the commutator bracket: $[x,y]=xy-yx$ where $x,y \in \mathcal{A}$. Here "$xy$" denotes $\mathcal{A}$'s (associative) multiplication.
So $\mathcal{A}$ can be viewed either as an associative algebra (with $(x,y) \mapsto xy$) or a Lie algebra (with $(x,y) \mapsto [x,y]=xy-yx$).
This is where it gets a little confusing. Suppose $\mathcal{L}$ is a subalgebra of $\mathcal{A}$. What is meant? a sub-associative-algebra or a sub-Lie-algebra? These are not the same thing.
A subalgebra (in the associative sense) is a subspace which is closed under the associative multiplication. A subalgebra (in the Lie algebra sense) is a subspace which is closed under the Lie bracket.
Every subalgebra (in the associative sense) is a subalgebra (in the Lie sense), but the converse is not true.
All that said, I would interpret "$\mathcal{A}$ is generated by a nilpotent Lie algebra $\mathcal{L}$" as follows:
[Here $\mathcal{L}$ may or may not be a subalgebra of $\mathcal{A}$ in the associative sense.]
"Generated" here means: The smallest associative subalgebra of $\mathcal{A}$ containing $\mathcal{L}$ is $\mathcal{A}$ itself. Or, in other words, for each $a \in \mathcal{A}$ there exists some multivariate polynomial $f$ (in non-commuting variables) and elements $x_1,\dots,x_n \in \mathcal{L}$ such that $f(x_1,\dots,x_n)=a$. So every element in $\mathcal{A}$ can be expressed as a linear combination of words over $\mathcal{L}$.