If you're talking about your friend's weekend, you can probably follow along pretty well because you can predict the sorts of things to be discussed. Consider the experiment described above. To put it another way, you know a lot of rules that you, as members in a language community, have a hard time expressing. Associations can't account for all aspects of language. Competence is what you know about language, performance is what you make.
Competence is entirely mental.
It's pretty much unrelated to what you learned in school. In fact, what you learned in school makes up a tiny percentage of what you know about grammar. This distinction is going to make it hard to study children's acquisition of language. They can usually understand grammatical forms before they can make them. The cognitive revolution reawakened interest in a lot of language phenomena.