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I saw it first hand. I wrote for a Northwest music magazine called The Rocket during those years. As the music scene got big the magazine grew with it and we went from being a smaller local type magazine to having more nationwide paid subscriptions than issues we gave away for free in stores (it was a free bi-weekly mag).
The scene didn't just get big it exploded. When Nirvana's Nevermind came out I was at the listening party for the release and I remember thinking that it would be big and it would make them big, but I had no idea. Six months later they were the biggest band in the world. A few months after that Pearl Jam were on the cover of Time Magazine. Entire New York fashion houses were changing their lines to be more "grunge." Bands that nobody outside of the the Pacific Northwest had heard of were suddenly having albums that debuted in the Billboard top 5 (if not number 1.) Record labels were pay mid to upper six and even seven figure advances to Seattle bands that had never even played a live show just to sign them.
As others said it killed the glam/heavy metal of the 80's. I remember seeing Jani Lane the singer from Warrant say that he went into the the band's record company and saw a huge banner for Warrant in their lobby. Their record came out and they hit the road and three months later at the end of the tour he went back in for a meeting and the banner was gone and one for Alice In Chains was there and he knew then that the gravy train was over.
It really was a hysteria. I think part of it was that the bands were kind of private and they didn't do a million interviews so finding out stuff about them was not easy and the fans were rabid. It was a wild, big time for sure. Like all music scenes it didn't last long. Within about 4-5 years it had calmed down. The really good, talented bands continued to have success but most of the bands faded away and disappeared and the next new thing started to kick up.
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