I do think it's a pretty complicated concept - LO understands things coming in order, for example "If you let mommy take a picture, you get fruit snacks" (Yes, I totally bribed with food to get a good Christmas card picture), or, "If you go brush your teeth, you can watch Team Umizoomi" (she gets to watch 1 episode before bed).
But she doesn't really get the whole "if I act nicely, mommy and daddy will be happy" concept.
It has to be very concrete, like... If I kick the Christmas tree = I get time out. And even then she will test the theory three or four times in a row. On the up side, after doing that one day, she didn't ever mess with the tree again - she just had to make sure we were serious.
I do think over the next few months they will understand that concept more and more though - and then they start to bargain with you, the little stinkers!