What's the term in psychology for the way people think of concepts using examples? I learned about this but forget its name. The idea is that when people hear a word or think of a concept they tend to come up with certain examples that fit the idea more than others. For example, if people think of birds, they tend to think of sparrows or seagulls, not penguins, even though penguins fit the definition of bird perfectly. If people are told to imagine a chair, they tend to think of one with 4 legs, probably made of wood, not something like a movie theater chair. What's the name for this?
You are talking about Exemplar Theory, since the question is almost verbatim from Wikipedia:


  For example, the model proposes that people create the “bird” category
  by maintaining in their memory a collection of all the birds they have
  experienced: sparrows, robins, ostriches, penguins, etc. If a new
  stimulus is similar enough to some of these stored bird examples, the
  person categorizes the stimulus in the “bird” category.


This contrasts with Prototype Theory, which proposes that categories are based on a single example rather than multiple:


  ... prototype theory would consider a category like bird as consisting of
  different elements which have unequal status - e.g. a robin is more
  prototypical of a bird than, say a penguin.


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Other theories on categorization (or how a Concept is structured in the mind) include Essentialism, and Theory-theory.