Elliott's choice of insult speaks directly to his young age. (It's hard to imagine a frustrated businessman calling someone "penis breath" in a heated boardroom clash, for example). In fact, screenwriter Melissa Mathison told The New Yorker that she stole this line directly from a child she knew in her previous tenure as a babysitter, stepmom, and older sister.
MOM: If you ever see it again, whatever it is, don't touch it. Just call me, and we'll have somebody come and take it away.
GERTIE: Like the dogcatcher?
ELLIOTT: But they'll give it a lobotomy or do experiments on it or something.
Everybody's acting age-appropriately here, given the whole "alien in the backyard" thing. Mom's not thinking "alien" and just wants to keep her kids safe. Elliott's more concerned with E.T.'s wellbeing and has a vague notion of how a strange creature would be treated, probably informed by pop culture. Even Gertie has her own frame of reference.
ELLIOTT: And look, fish. The fish eat the fish food, and the shark eats the fish, and nobody eats the shark. See? This is Pez. Candy. See, you eat it. You put the candy in here, and then when you lift up the head, the candy comes out, and you can eat it. Want some? This is a peanut, you eat it, but you can't eat this one, 'cause this is fake. This is money. See? We put the money in the peanut. See? Bank. See?
When it comes to must-have knowledge about how things work here on Earth, the intricacies of Pez dispensers and peanut-shaped banks probably don't crack the Top 20, but Elliott's exuberant, rapid-fire explanation of his world—a.k.a. the stuff in his room—reflects his youth.
ELLIOTT: But, look, you can't tell. Not even Mom.
GERTIE: Why not?
ELLIOTT: Because, uh, grown-ups can't see him. Only little kids can see him.
GERTIE: Give me a break!
Gertie may be the youngest, but she's not an idiot. Still, Elliott's tactics in swearing his little sister to secrecy reflect the "us vs. them" divide in the film between youth and adulthood.
ELLIOTT: Now I wish I would've listened in science.
Don't beat yourself up too much, Elliott. We're pretty sure "building an interplanetary communication device from common, household items" isn't covered until at least junior year.
MICHAEL: We're all going to die, and they're never going to give me my license.
At this point in the film, Michael's been caught impersonating a federal agent, stolen a van, and admitted that he's never driven an automobile forward before… but getting his license is still on his radar. Priorities!
MICHAEL: Where's the playground?
ELLIOTT: It's near the preschool!
MICHAEL: Where's that?
ELLIOTT: I don't know streets! Mom always drives me!
MICHAEL: Son of a b****.
Look: Michael and Elliott may have commandeered a federal vehicle, but they're still kids.
ELLIOTT: He's a man from outer space, and we're taking him to his spaceship.
GREG: Well, can't he just… beam up?
ELLIOTT: This is reality, Greg.
Duh, Greg. The matter-of-factness of Elliott's explanation, as well as Greg accepting it wholesale, reflect their youth. It also shows a change in the power structure. Up until this point in the film, Greg (and all of Michael's friends) treated Elliott like a pain in the butt. Now Greg's in the annoying little brother position.
ELLIOTT: I'll believe in you all my life. Everyday. E.T., I love you.
We're not crying. We just have some dust in our eyes. While we work that out, chew on this: What do you think Elliott means when he says he'll believe in E.T.?