Kinda true sometimes

Then why do they say "this kid is pretty fucking smart" instead of " this kid has good ass memory"

Because "smart" is typically associated with knowledge. And also because if the kid can remember what he was taught he now has that knowledge.
Most people conflate intelligence and knowledge, but they're certainly not the same. I've met more than a few intelligent people who couldn't pour piss out of a boot with the instructions on the sole, and I've met people who can rebuild an engine in their sleep or set up an entire computer network, but are just plain idiots otherwise. Once upon a time we knew the difference between "book smart" and "common sense."

But don't you need to remember what you've been taught???????????

The emphasis on most tests is remembrance not understanding.

Unfortunately that is a very valid point. It is possible to give tests geared toward comprehension of the material, but most tests only measure rote memorization. To make matters worse too many teachers think their jobs are either to move students through regardless of whether they learn, or they think they should give a hundred questions and try to trip you up on the tests. Testing should be simply to determine what you know and what you need to spend more time on. Government funds tied to standardized testing is the culprit there.