Lev Vygotsky (1896-1934) was a developmental psychologist who believed that a child's learning proceeded development.
Vygotsky argued that our current state of development grows when we are presented with a conflict that is just beyond our current abilities. The child must look to others for help, and in doing so, their abilities grow. This is what Vygotsky refers to as The Zone of Proximal Development (ZPD).
The child receives this assistance from The More Knowledgeable Other (MKO). The MKO is any person who has a higher level of understanding on a topic than the child; usually we think of a parent or teacher. However, a child's peer is just as capable of guiding the child and being the MKO.
Infact, Vygotsky believes that children learn the most from their peers in play. Play allows the child to discover self regulation and encourages communication and skill-building. "Whenever there is an imaginary situation in play, there are rules" (Vygotsky). The child will spontaneously express these rules and needs in play, and the other children respond to those. The child will also learn what is socially accepted by their peers and learns how to read the social cues in a situation.
Sources Used:
http://www.simplypsychology.org/vygotsky.html
Images Used (Top To Bottom):
http://www.instructionaldesign.org/theories/social-development.html
http://www.education.vic.gov.au/school/teachers/teachingresources/discipline/english/proflearn/pages/velszopds56.aspx