This happens to me too. I recently found out there is a physical reason for it: actual hearing loss caused by a condition called Meniere's disease.
I first noticed the problem back in 1998. It can be INCREDIBLY frustrating, even though I know "why." I am taking a diuretic to deal with the fluid buildup in the inner ear, but it's only been a few months, so I'm not really noticing any helpful changes yet.
The doctor did tell me that it's "not impossible" that part of the problem is brain-based auditory processing also, but he wants to treat the most salient issue first, then go from there.
@LastSanityJermaine: words get garbled--good example.
@Ausome: often, even if I'm *fairly* sure I heard right, I will still ask the person to repeat what he/she said, just to be "sure."
_________________
The existence of the leader who is wise
is barely known to those he leads.
He acts without unnecessary speech,
so that the people say,
'It happened of its own accord.' -Tao Te Ching, Verse 17