This can take two basic forms for me. I can have difficulty recognising that speech is speech, or "my language processing centre" (wherever that is) can have difficulty recognising speech as speech, and hence (in the second case) I know that speech is taking place but cannot comprehend it.
When I simply cannot recognise speech as speech, I do not process it and do not know that I am supposed to be. Outwardly, this can look as if I am not paying attention, or "absorbed in something else".
In the second case, I often know that speech is going on, but I cannot seem to process it, or it sounds like a "background thing" not worth paying attention to.
CAPD.