I found that one of the hardest things to understand. How could my dad talk for hours about the war, his life in the merchant navy and when he was a boy. He could tell me the names of everyone in his street, what they did and he could go into great detail about everything and the stories were often very entertaining, yet he couldn't remember two minutes ago or who's car was parked out front, it was his of course. He couldn't remember that I was living with him, if I left the room and came back he would be surprised to see me.
Someone once told me to think of a cabbage with all the old memories deep inside and the new memories in the outer leaves. As the outer leaves fall of so do the new memories but the old memories are still safely tucked away deep inside and will remain for longer.