Research over the last 50 years has shown that reasoning with and about context is an essential aspect of human cognition, permeating language, memory, and reasoning capabilities. This integral process is developed over a lifetime through experiential learning. Given the goal of artificial intelligence to create human-like intelligence in a machine, it is essential to consider and incorporate the concept of context in intelligent system design and implementation. This paper discusses contextual reasoning in humans and how it helps humans successfully deal with complex cognitive tasks. We further link this research on context in cognitive psychology with the current research in contextual reasoning in Artificial Intelligence systems.