HOLY. SHIT.
The combat in UNS:Generations is
so goddamn smooth. I'm absolutely blown away by how much they've managed to improve the fluidity from UNS2. The Kawarimi meter is really nice, because it brings it to your attention to using it continuously and effectively. Also when it's low you change your tactics slightly to account for it needing to recharge, which keeps combat interesting. Fighting online it'll be something to pay close attention to with your opponent. Also, it seems like, getting hit by an opponent's Ninjutsu will recharge all of yours completely, so there may be some advantage to occasionally taking a hit if you like to get in at your opponent with physical combos.
I haven't quite gotten the hang of the chakra cancelling to where I feel like I could use it effectively, since I only used it a couple of times in my first playthrough, but it's REALLY handy when you use it right. The ability to break off from attacking and come from another angle, or suddenly back off is great. It may also be because the demo ends with fighting Masked Madara and Naruto's kagebunshin-based combos are really quick hitting, but combat is very swiftly paced.
The slight power down to the aforementioned moves makes combat better in every way. No single hit feels like it completely devastates you, while they still hold enough power to feel like it can/does significantly turn the tide of battle when things are a little out of your favor. Naruto's 6-Tails awakening is a bit toned down as well so that he's less unstoppable, but still highly effective. I'm looking forward to playing through a few more times tomorrow to get the hang of some of the new moves, and especially to try out some of the new attacks (Sage Mode Naruto has totally new combos, and they're spectacular looking).
It looks like there's been a lot of focus on balance, since UNS:Generations looks to be pulling in more competitive combat, and I think that if the demo is any indication, they're succeeding on all levels. Oh man, guys - I thought I was excited before, but I can hardly wait for this game.
Also - I should note that the demo is all standard combat - no QTEs.
Lastly, for those interested, I've found a few full playthroughs online. You can see most of the moves between them, but the last one must've played the game before recording, because they're fucking DEVASTATING with the cancel combos.
Sasuke - 5:23 ||| Pain - 8:12 ||| Masked Madara - 11:08
Sasuke - 4:47 ||| Pain - 7:45 ||| Masked Madara - 10:49
Sasuke - 5:27 ||| Pain - 8:41 ||| Masked Madara - 11:55
X 
He also mentioned that grapples, Ultimate Jutsus, and Awakenings are a little less powerful, jumping in the middle of combat is fantastic, and that the Kawarimi meter is tricky, but apparently combat feels better and flows more smoothly on all fronts!!