There are a number of different theories concerning language acquisition. Many still leave some important questions unanswered. Most theories agree on several key principles though. For young children, language acquisition is a natural process. It mostly comes through social interaction. Children acquire the language that they hear as they develop. This comes from the adults in their household, and from interactions with other children. These interactions create a natural desire to communicate.
It seems that humans have a unique ability to learn language. This is thought to be because of specialized parts of the brain, namely Broca's area, which deals with motor ability; and Wernicke's area, where context is derived.
There are studies that show that the "baby talk" that adults use around children helps them to acquire language. Often this type of talk is just a little more advanced than the child's current ability even though it is characterized by exaggerated sounds and simple vocabulary and grammar. This forces the child to adapt to the next linguistic level in order to keep up with communication.
As a child acquires more language, they typically go through what is known as vocabulary bursts. They begin to notice patterns in grammar and vocabulary. This leads to an understanding of the rules of language. They begin to make fewer mistakes as their abilities grow.