This essay reviews the significance of context in understanding the words.Firstly,two types of context(linguistic context and extra-linguistic context) are discussed.Then the functions of context in determining the word meaning is analyzed for clearer understanding.Thirdly,the essay focuses on the meaning transfer resulting from the change of situation and suggests the strategies of enlarging vocabulary.In order to well grasp the correct word meaning from contexts,we should know better about the contexts and have a good command of knowledge of cross culture and background information. This essay reviews the significance of context in understanding the words. Firstly, two types of context (linguistic context and extra-linguistic context) are discussed. The functions of context in determining the word meaning is analyzed for clearer understanding.Thirdly, the essay focuses on the meaning transfer resulting from the change of situation and suggests the strategies of enlarging vocabulary. In order to well grasp the correct word meaning from contexts, we should know better about the contexts and have a good command of knowledge of cross culture and background information.