I have been in Germany since August, and taking German lessons since September. I force myself to go to events that are in German, even though I know that I will not be able to understand everything, and that as the evening wears on, I will slowly come to the realization that I understand nothing of import.
Last Saturday evening, I had a minor epiphany. I went to a barbecue, and sat around and talked for two hours, understood almost everything, and even was able to participate in the conversation. The people I talked to even understood me, and I think a couple of times they laughed at my jokes, rather than my extremely flawed grammar, pronunciation, or word choices. I did not day dream, become confused, or tune out. It felt great.
I remember a similar epiphany in 1981 when I was in the Peace Corps and studying Thai. I am sure that professionals in language learning have a word for when these barriers are crossed, but I am not sure what it is. It certainly does feel good.