The Standard Theory differs from the early Transformational – Generative Grammar theory in that it introduces the distinction between competence and performance of an ideal speaker-hearer of a language as well as between deep and surface structure in a sentence.

According to Chomsky “linguistic theory is concerned primarily with an ideal speaker-listener, in a completely homogeneous speech-community, who knows its language perfectly and is unaffected by such grammatically irrelevant conditions as memory limitations, distractions, shifts of attention and interest, and errors (random or characteristic) in applying his knowledge of the language in actual performance” (Chomsky 1965:3). The study of actual linguistic performance should account for a number of factors, the underlying competence of the speaker-hearer in particular. Thus, competence can be defined as the speaker-hearer’s knowledge of his language which allows him to construct and understand indefinitely many grammatical sentences. Performance, on the other hand, can be defined as the actual use of language in concrete situations and is concerned with acceptability rather than grammaticality. It should also be borne in mind that errors occurring in linguistic performance are irrelevant to the study of linguistic competence since performance does not directly mirror competence. The goal and challenge at the same time for a linguist and for a child learning a language is to figure the underlying system of rules of the speaker-hearer on the basis of his performance. Thus, a grammar of a language may be said to aim at a syntactic description of the ideal speaker-hearer’s intrinsic competence, and if this grammar is explicit enough, it may be termed a generative grammar. Hence, generative grammar is there to describe the knowledge of the language of a speaker-hearer, which knowledge he utilizes in actual language use.

Generative grammar is a system of rules which generate an indefinitely large number of structures. These rules may be analyzed within three components of generative grammar, namely syntactic component, phonological component, and semantic component. The syntactic component comprises of rules which generate sentences and assign to them two structural analyses, a deep structure and a surface structure. Deep structure is represented by the underlying phrase marker, which is assigned by rules of the base (an equivalent of phrase structure rules of the early model of TGG), whereas surface structure is represented by the final derived phrase marker, which is assigned by the transformational rules. Figure 23 below presents how the four sets of rules interrelate.