Beginning when you're in your 20s, you begin to lose brain cells a few at a time. Your body also starts to make less of the chemicals your brain cells need to work. The older you are, the more these changes can affect your memory. Aging may affect memory by changing the way your brain stores information and by making it harder to recall stored information. Your short-term and remote memories aren't usually affected by aging. But your recent memory may be affected. You may forget names of people you've met recently. These are normal changes. Many things other than aging can cause memory problems. These include depression, other illnesses, dementia (severe problems with memory and thinking, such as Alzheimer's disease), side effects of drugs, strokes, a head injury and alcoholism. How can I tell if my memory problems are serious? A memory problem is serious when it affects your daily living. If you sometimes forget names, you're probably okay. But you may have a more serious problem if you have trouble remembering how to do things you've done many times before, getting to a place you've been to often, or doing things that use steps, like following a recipe. Another difference between normal memory problems and dementia is that normal memory loss doesn't get much worse over time. Dementia gets much worse over several months to several years. It may be hard to figure out on your own if you have a serious problem. Talk to your family doctor about any concerns you have. Your doctor may be able to help you if your memory problems are caused by a medicine you're taking or by depression. http://familydoctor.org/124.xml

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OK, longish answer with easy to understand analogy at the end. Take your pick. When your brain receives information, it can hold in a very short term memory pattern, similar to RAM on a computer. This allows you to remember small amounts of information to make simple use of it, for example, you can perform mental arithmetic by remembering which two numbers you have to add together. This can then be discarded, but often it gets stored as a memory pattern that can be classed as short term - seconds to minutes. If the data is recalled, for example you are asked to remember a name and an hour ater asked to recall it, the information is flagged as useful and beigins to be processed in a different way. The more it is asked to be recalled, the more it is reprocessed into longer term memory, which can then be reaccessed later with ease. For example, you may have forgotten the name you were asked to remember, but you can recall your own with relative ease, because you have had to recall that many times before. Now if someone asks you, it is easy to remember, even if it has been years since someone last asked ou it. As people begin to suffer from dementia, the information is taken in the same, but the processing power is lost, so that the memory cannot be stored efficiently, meaning that even though the recall ability still works, the memory cannot be stored so no short term memory is there to be recalled. However, long term memories were processed and stored months/years ago, before the dementia caused the problems to begin, so these can often be recalled with relative ease still. It's a bit like photographs. You take photographs each year. In the distant future, your camera breaks and can no longer capture new images, however your collection of photos from long ago still remains, so you cannot take new photos but you can still look at the old ones.