I too have wondered what exactly are the victory conditions, or what exactly makes an AI quit?
there have been more than one occasion where I have had an AI quit, when they still had 3-4 planets, and a massive fleet. Yet other times, an AI in a clearly hopeless situation will still keep trying (backed into 1 system, an asteroid, and still sending 1-2 frig's at a fully developed system, with massive defenses and such).
A couple of times, I realized I left superweapons on auto-fire and "accidently" wiped someone out and didn't realize it, but there were some that I could find no real reason for them quitting.
and a note about the continue playing thing... you can't get achievements in that game after that point.