Science Daily:

The study suggests that we need to employ a set of cognitive skills to maintain a number of friends (and the keyword is 'friends' as opposed to just the total number of people we know). These skills are described by social scientists as 'mentalising' or 'mind-reading' - a capacity to understand what another person is thinking, which is crucial to our ability to handle our complex social world, including the ability to hold conversations with one another. This study, for the first time, suggests that our competency in these skills is determined by the size of key regions of our brains (in particular, the frontal lobe).

Professor Dunbar, from the Institute of Cognitive and Evolutionary Anthropology, explained: '"Mentalising" is where one individual is able to follow a natural hierarchy involving other individuals' mind states. For example, in the play 'Othello', Shakespeare manages to keep track of five separate mental states: he intended that his audience believes that Iago wants Othello to suppose that Desdemona loves Cassio [the italics signify the different mind states]. Being able to maintain five separate individuals' mental states is the natural upper limit for most adults.'

Professor Robin Dunbar, said: 'We found that individuals who had more friends did better on mentalising tasks and had more neural volume in the orbital frontal cortex, the part of the forebrain immediately above the eyes.

Dunbar is also a leading proponent of the social brain hypothesis—meaning, our brains are big because we have to manage/navigate complex social relationships and arrangements. The larger the society, the larger the brain.

Dunbar also has this hypothesis of grooming:

Apes and monkeys, humanity's closest kin, differ from other animals in the intensity of these relationships. All their grooming is not so much about hygiene as it is about cementing bonds, making friends, and influencing fellow primates. But for early humans, grooming as a way to social success posed a problem: given their large social groups of 150 or so, our earliest ancestors would have had to spend almost half their time grooming one another—an impossible burden. What Dunbar suggests—and his research, whether in the realm of primatology or in that of gossip, confirms—is that humans developed language to serve the same purpose, but far more efficiently.