Theory of Mind: This is the concept that you cannot ever know what is going on in someone else's mind, that you can only guess what the person is thinking by reading that person's facial expressions or body language. Based on our own experience we can gauge what another person would say or do or feel in a similar situation, but we cannot ever be completely sure because we don't have access to their thoughts.
Children develop Theory of Mind around the age of two and a half or three. Before that the child assumes that the people around her know what she is thinking, and she doesn't question other people's thoughts at all. An experiment to demonstrate this is: two children are in a room with a basket, a box, and a cookie. Annie puts the cookie in the box with Jenny watching. Annie leaves the room, Jenny stays in the room. You enter the room and move the cookie into the basket. Then ask Jenny where Annie will look for the cookie first. Before ToM develops, she will answer the basket because she saw you move it there and therefore assumes that Annie will know what she knows. After ToM develops, she will say the box because she knows Annie didn't see the cookie being moved so she will think it's still where she put it. Because autism develops about the same age, it's thought that autistic children don't develop ToM and have a difficult time relating to others as they don't understand that every single person will have different attitudes, beliefs, thoughts, and experiences. They assume that what they know is what everybody knows.
Theory of Mind makes us very selfish in the way we interact with other people. Because we cannot put ourselves into the mind of another, we view everything through glasses made up of our own experiences and rely on the other person to tell us what she feels or thinks about something. Phrases like "she knows what she did to make me angry" or "he should just know what I like" are good examples of people neglecting to consider that there is no possible way another person can fully understand you and your reactions. Yes, she knows what she did, but how can she know why it makes you angry unless you tell her? How is a man to know what you like if you don't tell him? He has not led the same life as you and couldn't know that you prefer flowers over chocolate, squeezing over caressing, gardening over hiking.
Generalized Other: This is the group of people that provide you with a sense of what is right, proper, civilized, sane, shameful, wrong, disgraceful, and well, judgment as a whole. These people have and will influence every decision you make whether you are aware of it or not. Some of the people in your Generalized Other can be chosen consciously but many are unconscious choices. You can select people that are dead by deciding to live by that person's principles or ideas (a good example of that is the phrase 'What Would Jesus Do?'). There is no need to consult the person directly when faced with a decision, instead simply think of that person and how she would react in the same position. What is insidious about GO is the fact that the people we didn't choose are frequently the ones with the strongest influence in our lives. Like parents, siblings, family, teachers, and ministers. It's what stops you from, say, calling in sick to work just because you don't feel like working (that's just not right) or wearing white or black to a wedding (that's just not done). Many people don't question where these ideas/judgments come from, they simply live their lives accordingly.
Society as a whole participates in our GO as well. Which society you live in will determine what rules you are expected to follow. Things like wearing shoes while running errands, viewing pornography, holding hands as you negotiate price, maintaining a certain body size or shape, standing close to strangers or far from strangers, and closing your shop for the mid-afternoon nap time are good examples of societal judgments as part of our GO.
Put the two concepts together: We are judged by those around us both as a society and as individuals. We have people that can't possibly understand our minds advising us on our activities and thoughts throughout the day (yes, our thoughts - all those parents who tell their children "you don't really hate her" or "you should be happy"). The people judging us are doing so by their own ideas of what is correct, not what might be correct for you in accordance with your life experiences. So, if these people can't read your mind then why follow their advice? Why not question their advice before taking it and decide if it feels right to you? Also, relationships are very difficult if each side is unwilling or unable to make an attempt to understand the other person. To ask questions and not assume that the other person feels the same way you do in a similar situation.
Ultimately, we are selfish creatures that have social requirements to ensure our survival. Our ancestors were required to have rules and restraints to keep the group alive. We need to be social to keep populating...and we live in our own bubble of thoughts that make us incapable of truly understanding another person.