The way intelligence works, in my opinion, is this:

1) experiences are stored in the brain. Experiences contain inputs from the 5 senses as well as the sense of danger/satisfaction at that point.

2) at each given moment, the brain takes the current input and matches it against the stored experiences. If there is a match (up to a threshold), then the sense of danger/satisfaction is recalled. Thus the entity is able to 'predict', up to a specific point, if the outcome of the current situation is bad or good for it, and react accordingly.

The key thing to the above is that the whole process is fused together: the steps for adding new experiences, matching new experiences and recalling reactions is fused together in big pile of neurons.