Think of the context window as the model's working memory. Everything the AI is currently considering has to fit inside it: your messages, its own answers so far, any documents you gave it, and its standing instructions (see system prompt). The size is measured in tokens.
When a conversation gets long enough to approach the limit, older material gets dropped or compressed. That is the moment an AI seems to "forget" something you said an hour ago. It did not get careless. The material simply no longer fits.
Why you keep hearing it
Because context window size is one of the headline numbers in every model announcement, and because "context" has become shorthand for a bigger idea: the quality of what you give the AI to work with. People increasingly say the skill of using AI is less about clever prompts and more about good context.
What it means for you
Practical habits: give the AI the relevant background material rather than assuming it knows your situation, and start a fresh conversation when a long one gets muddled. If an AI tool seems to lose the plot in long sessions, the context window is usually the reason.