An ELT Glossary : Competence and Performance
The two terms competence and performance were coined by Chomsky to differentiate between a user's knowledge of the language and the way that the language might actually be used in communication.
Competence refers to the user's innate knowledge of the language, which allows them to understand and produce an infinite number of utterances, and to recognise that eg The cats are in the garden is an acceptable English sentence whereas *The cat are garden the in is not. Performance, on the other hand is how that knowledge might be applied in actual communication - where it will be affected by such factors as "memory limitations, distractions, shifts of attention and interest" (Chomsky 1965 :3), to which we might add tiredness, nervousness, and a host of other factors.
These factors explain, for example, differences between spoken and written English - as this example of spoken English shows (the symbol + indicates a pause):
well in the upper right hand corner + paper + you sh- you write eh + a number three in black + + what - underneath this number + you draw a line + in red + and then underneath this you draw a square in black + a bigger square bigger than the number I mean (Brown and Yule 1983: 127)
The false starts, hesitations, repetition and simplified syntax are performance features and are due to the real time situation - the speaker is having to decide what to say, how to say it and utter it spontaneously. Given time to think and write, the same person would no doubt produce something like : Write the number 3 in the top right hand corner of the paper and draw a red line underneath it. Under that, draw a square, using black, which is bigger than the number.
See also : Communicative competence
Brown G. and Yule G., Teaching the Spoken Language, Cambridge : CUP
Chomsky, Noam. (1965). Aspects of the Theory of Syntax. Cambridge, MA: MIT Press.