Abstract An attempt was made to characterize and explain developmental differences in children's thinking, specifically in their understanding of balance scale problems. Such differences were sought in three domains: existing knowledge about the problems, ability to acquire new information about them, and process-level differences underlying developmental changes in the first two areas. In Experiment 1, four models of rules that might govern children's performance on balance scale problems were proposed. The rules proved to accurately describe individual performance and also to accurately predict developmental trends on different types of balance scale problems. Experiment 2 examined responsiveness to experience; it was found that older and younger children, equated for initial performance on balance scale problems, derived different benefits from identical experience. Experiment 3 examined a potential cause of this discrepancy, that younger children might be less able than older ones to benefit from experience because their encoding of stimuli was less adequate. Independent assessment procedures revealed that the predicted differences in older and younger children's encoding were present; it was also found that these differences were not artifactual and that reducing them also reduced the previously observed differences in responsiveness to experience. It was concluded, therefore, that the encoding hypothesis explained a large part of the developmental difference in ability to acquire new information.