When I started to read chapter books, I frequently ran across words I didn’t know. Being too lazy to look them up in a dictionary, I just made up definitions for the words and continued along.
Children learn tens of thousands of words, and since they don’t generally carry around a pocket dictionary to look up every new word, they are frequently forced to do what I did: make a good guess and run with it. (Contrary to popular belief, adults rarely define words for children, and children don’t necessarily ask for definitions, either.)
While we tend to focus on children’s acquisition of language, the truth is that even adults must deal with new vocabulary. For one thing, the English language contains many more words than any one person can know. Estimates vary considerably, but you typically see estimates of about 500,000 words in English and only 60,000 in the adult vocabulary. So the chances of coming across a new word are pretty good, especially if you read the New Yorker.
Similarly, new words pop into the language all the time, such as to Bork somebody or to fax a document. (Those are the classic and now somewhat rusty examples. A more modern one is to Swift-Boat a candidate.)
While we can sometimes look up definitions, we often trust our instincts to define these new words for us. How exactly this happens is still not completely understood. Some new uses of old words are probably adopted as a type of metaphor (not that we know how metaphor works, either). Others may be related to derivational morphology (the method of creating a new word from an old word by adding an affix; e.g., happy -> happiness, employ -> employee).
I recently posted a new experiment, the results of which will hopefully help us better understand this process. If you have 5 minutes, please participate (click here). As always, when this study is done, I will post the results here and on the main website.