Research into artificial intelligence has increased significantly in recent years. However, the fundamental question of what intelligence is and how it works remains open to some extent. Traditional definitions of intelligence are broad and lack clarity regarding its nature and mechanisms. The nature of consciousness is another matter that has been widely explored with multiple theories but for which we do not have a final agreed theory, especially in terms of its relation to intelligence. In this work, we present a (...) preliminary theory of the nature of intelligence and its working mechanisms. We contrast it against observations to show that our theory is consistent with observed reality. We also use our theory of intelligence to offer a theory on the nature of consciousness, as well as its relation to human understanding and intent. We then show that our theories can be consistent with the theory of evolution. Similarly, we explore examples of how our theory applies to specific cases to show its consistency across applications. Lastly, we outline how our theory can pave the way towards artificial general intelligence. Our theory is unproven. (shrink)