Linguistic competence is the system of linguistic knowledge possessed by native speakers of a language, it is in contrast to the concept of Linguistic performance, the way the language system is used in communication. The concept was first introduced by Noam Chomsky as part of the foundations for his Generative grammar, but it has since been adopted and developed by other linguists, particularly those working in the generativist tradition. In the generativist tradition competence is the only level of language that is studied, because this level gives insights into the Universal Grammar, that generativists see as underlying all human language systems. Functional theories of grammar tend to dismiss the sharp distinction between competence and performance, and particularly the primacy given to the study of competence.
According to Chomsky, competence is the 'ideal' language system that makes it possible for speakers to produce and understand an infinite number of sentences in their language, and to distinguish grammatical sentences from ungrammatical sentences. This is unaffected by "grammatically irrelevant conditions" such as speech errors.
Read more about Linguistic Competence: Competence Versus Performance, Competence and Components of Grammar, Related Areas of Study
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“The most striking aspect of linguistic competence is what we may call the ‘creativity of language,’ that is, the speaker’s ability to produce new sentences, sentences that are immediately understood by other speakers although they bear no physical resemblance to sentences which are ‘familiar.’”
—Noam Chomsky (b. 1928)