Selective hearing is a way of describing the tendency of some people to ignore things that they do not want to hear. It is NOT a physiological condition, as they are physically hearing the words, but their minds choose not to acknowledge the worlds. In many cases, the conscious mind does not appear to receive the information, so it is different than an active ignoring of speech. Instead, it is a sort of selective inattention that may be done consciously or subconsciously.
Classically, selective hearing is an attribute people associate with men. (SORRY!) The standard example would be a woman asking her husband whether he wants to go to the opera that night, only to have him seemingly ignore her. However, when she mentions something of interest to him, such as football or beer, he immediately responds as though he had been listening all along. Although the example seems sexist, in fact they are not uncommon in everyday interactions between people of all genders and relationships.
Attention is a complex system, and is not particularly well understood, although it is studied at great length. One thing that does appear to be certain is that the degree of attention a person gives is able to shift radically based on the circumstance. Certain things appear to command more attention, while others seems nearly impossible to focus on. Selective hearing is simply a manifestation of the mutable nature of attention, and it is rarely indicative of any sort of overt malice or disdain for a subject or person speaking. It has more to do with the way ones mind prioritizes things.
It is uncommon for parents to believe that their children suffer from some sort of hearing disorder if the level of selective hearing they express is particularly high. Although physiological causes may be responsible, it is more commonly related to an attention disorder. Children are particularly susceptible to selective hearing, as they are constantly being bombarded by new information to assimilate. In order to cope they may shut out things their brains decide are unimportant.