Hearing and understanding are two very different things! I can usually hear sound, but it's rare when I hear the sound as actual individual words. Usually, I can catch a word here and there but miss much of what's said, even in a relatively quiet place, face to face. Groups up the ante, meaning that I understand even less, and background noise means that all I know is that various people are speaking without any understandable words. My difficulty understanding is due to Meniere's, which offers severe distortion, plus recruitment, on top of the ever-present two different tinnitus noises. Even worse, some days I can function well enough to at least understand the topic being discussed, but other days (or even a few minutes later) it's all gibberish, due to fluctuation. That means that people are confused when I'm having a really bad day because they saw me earlier when I was doing much better (or, less badly).
A sound booth is a far, far cry from the real world. I've never had anything during tests other than extremely simple sentences where it's possible to fill in what you can't understand. Tests never include names or numbers. Why don't audiologists use numbers in sentences during testing? That would be a far truer gauge of how well you understand. You almost never converse with anyone in a place that has no background noise, especially others talking nearby (separate conversation). The real world has constant challenges, while the sound booth tests offer simple sentences like, "It's time for lunch now."
You make some solid points and observations. I am impaired hearing, but add Meniere's and tinnitus to the equation and it becomes even a bigger challenge.