We discover that Emma and Killian knew each other before, when Emma unknowingly uses her powers at eight yeras old to a then eleven year old Killian and eventually something happens to make them forget one another. In present day it's just after the events of the mid season finale and Emma comes back to Granny's to talk to Killian about what happened with Rumple.

[This is set right after 3x12] - After their return to Storybrooke, Henry can't remember his old life & the things that happened in Neverland, yet he's unconsciously suffering from PTSD, especially in his dreams. One night Killian hears his screams and awakens the boy from his nightmare. To distract him he begins to tell a tale about an honorable pirate and a courageous young lady.