How is a young child able to learn language so easily? It's a well known fact that the earlier children are exposed to languages the better, as young children have a better ability to learn new languages than adults. 


Why is this? 
At what age does a human's mind start to lose this ability? 
What causes the change? 
Does this phenomenon have a name?
It's theorized that there is a Critical Period of language development in children below the age of five (roughly, as age ranges always are in Developmental Psychology). 

Probably the most significant and readily verifiable finding is that a critical period exists for the learning of Phonemes. Research has suggested children readily differentiate phonemes from all human languages at very early ages; less than 5 years old. There is much debate in Linguistics on this matter and many articles covering the discussion .

After this Critical Period most children and adults can only accurately differentiate and produce phonemes present in their native languages and have difficulty producing and differentiating phonemes from other languages. This is why when learning a language late in life learners often struggle with pronunciation. 

A classic example of this is the difficulty native Japanese speakers have with English L and R sounds. As L2, late-in-life second language learners they struggle differentiating the actual sounds and thus producing the different sounds.

There are some interesting theories in what can overcome this deficiency in learning "late" (L2) second languages, see Age and Ultimate Attainment in the Pronunciation of Foreign Languages and Teaching Second-Language Phonetics to Adults.

In addition Noam Chomsky has some interesting interviews and publications about language development in children, such as his interview with Lillian R. Putnam. 

Note that Chomsky's opinions and theories are controversial, particularly his concept of a "Language Acquisition Device", which is Nativist to an extreme. There is much material on Chomsky's Theories of Language Acquisition but I would take his theories with a grain of salt.

The Critical Period has been found to apply even to children learning sign language. A good overview on this situation is The critical period for language acquisition and the deaf child's language comprehension : a psycholinguistic approach by Rachel I. Mayberry.


  The critical period hypothesis for language acquisition (CP) proposes that the outcome of
  language acquisition is not uniform over the lifespan but rather is best during early childhood.
  The CP hypothesis was originally proposed for spoken language but recent research has shown
  that it applies equally to sign language