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Association by contiguity is the principle that ideas, memories, and experiences are linked when one is frequently experienced with the other. For example, if you constantly see a knife and a fork together they become linked (associated). The more these two items (stimuli) are perceived together the stronger the link between them. When one of the memories becomes activated later on, the linked (contiguously associated) memory becomes temporarily more activated and thus easier to be called into working memory. This process is known as priming, and the initial memory that primed the other is known as the retrieval cue.
Association by contiguity is the root of association by similarity. Association by similarity is the idea that one memory primes another through their common property or properties. Thus, an apple may prime a memory of a rose through the common property of red. These two become associated even though you may have never experienced an apple and a rose together (consistent with association by contiguity).
When one associated memory, a group of associated memories, or a whole line of associated memories becomes primed, this is known as spreading activation.