Intelligence is a universal knowledge creation system. It uses the only known method of knowledge creation: evolution. Knowledge is information adapted to a purpose.
The replicators that evolve are called ideas. They are varied and selected too.
How are they selected? By criticism. Criticisms are themselves ideas which can be criticized.
To evaluate an idea and a criticism of it, you also need context including goals (or purposes or values or something else about what is good or bad). Context and goals are ideas too. They too can be replicated, varied, selected/criticized, improved, thought about, etc.
A criticism explains that an idea fails at a goal. An idea, in isolation from any purpose, cannot be evaluated effectively. There need to be success and failure criteria (the goal, and other results that aren’t the goal) in order to evaluate and criticize an idea. The same idea can work for one goal and fail for another goal. (Actually, approximately all ideas work for some goals and fail for others.)
How do I know this? I regard it as the best available theory given current knowledge. I don’t know a refutation of it and I don’t know of any viable alternative.
Interpretations of information (such as observations or sense data) are ideas too.
Emotions are ideas too but they’re often connected to preceding physiological states which can make things more complicated. They can also precede changes in physiological states.
We mostly use our ideas in a subconscious way. You can think of your brain like a huge factory and your conscious mind like one person who can go around and do jobs, inspect workstations, monitor employees, etc. But at any time, there’s a lot of work going on which he isn’t seeing. The conscious mind has limited attention and needs to delegate a ton of stuff to the subconscious after figuring out how to do it. This is done with e.g. practice to form habits – a habit means your subconscious is doing at least part of the work so it can seem (partly) automatic from the perspective of your consciousness.
Your conscious mind could also be thought of as a small group of people at the factory who often stick together but can split up. There are claims that we can think about up to roughly seven things at once, or keep up to seven separate things in active memory, or that we can do some genuine multi-tasking (meaning doing multiple things at once, instead of doing only one at a time but switching frequently).
Do to limited conscious attention and limited short-term memory, one of the main things we do is take a few ideas and combine them into one new idea. That’s called integration. We take what used to be several mental units and create a new, single mental unit which has a lot of the value of its components. But it’s just one thing so it costs less attention than the previous multiple things. By repeating this process, we can get advanced ideas.
If you combine four basic ideas, we can call the new idea a level 1 idea. Combine four level 1 ideas and you get a level 2 idea. Keep going and you can get a level 50 idea eventually. You can also combine ideas that aren’t from the same level, and you can combine different numbers of ideas.
This may create a pyramid structure with many more low level ideas than high level ideas. But it doesn’t necessarily have to. Say you have 10 level 0 ideas at the foundation. You can make 210 different combinations of four ideas from those original 10. You can also make 45 groups of two ideas, 120 groups of three, and 252 groups of five. (This assumes the order of the ideas don’t matter, and each idea can only be used once in a combination, or else you’d get even more combinations.)