The field of simulation-based procedural education in medicine is undergoing rapid development, with significant improvements in both graphic and tactile fidelity. As a consequence, the use of simulation for competency assessment and credentialing is evolving rapidly. Establishing the conceptual framework for developing such assessments using simulation is becoming critical to the expansion of simulation-based education and assessment in medicine. Although medical literature explores the educational theories in other aspects of medical education, the applicability of those concepts to the simulation of time-critical and clinically dangerous procedures has not been addressed explicitly. In particular, the issue of how one establishes standards for simulation-based procedures is central to how simulation would be used for competency assessment. This article briefly reviews the current medical education theories and discusses their applicability to simulation-based education. An alternative methodology of standards setting involving the use of benchmarking may be more appropriate to assessing critical procedural skills. Although much of the existing simulation literature (and practice) implicitly uses benchmarking methods, the conceptual framework that justifies its use has not been discussed explicitly. Finally, the development of clinical benchmarks as the standards-setting mechanism for procedural simulation-based learning, feedback, and assessment will be critical to establishing the clinical relevance of simulation.