Preface: these questions may be stupid. these questions may be answered in the 3rd film. *edit* and don't read this if you haven't seen the movie yet

I have a question about time in the Matrix. I fully understand the movies, and the meaning of the meeting with the architect. The one thing I don't understand is the passage of time in the Matrix its self.

Neo claims that they've been fighting the machines for over 100 years (I want to say 120 years or something close to that). Regardless, how did these years get passed in the virtual reality of the Matrix?

When Neo is pulled out, it's 1999 ("the peak of [our] civilization"). One possibility is that it is always 1999. How does this work and still allow for a life cycle?

I don't know, it's just something that's been bugging me. If the answer is that it is continuously 1999, then please explain that possibility. I'd like to hear it.


ps - the way I understand it, Morpheus was wrong in the first film, and it isn't anywhere near 2199 at the time they release Neo. If there have been 6 versions of the Matrix (7, including the utopian one), then it is probably closer to 2799. Am I thinking correctly here?