One reason it is supposed that children are more likely to remember past lives is that their ("ego") consciousness is not yet fully formed. They have what has often been called in psychology, the oceanic consciousness. Essentially, their individuality, or ego, isn't as strongly as formed as an adults, and they feel themselves more part of their "environment". In most cases, as the child hits age 6 and when they develop a stronger sense of individuality, they typically lose any past life memories. As adolescents and adults, our consciousness gets very focused on our "current" individuality. We get all wrapped up in our roles we play now.
At the same time, children do not have a fully developed consciousness, it has been shown their consciousness is actually more active than an adults in some ways. One of the psychologists who perfomed a study on this stated the difference with adults is actually just how unconscious we are compared to children. Not exactly how we normally like to view things.
A more important question is, what exactly IS memory.
If you follow the whole NDE and reincarnation thing in detail and to their logical ends, you'll realize for them to be a true phenomenon and to account for the observations out there, memory ultimately would not be stored (solely?) in the brain. Try that on for size ;-)