Oh, they DEFINITELY have selective hearing!
I chatter all the time to my three, and they are quite, quite capable of picking out words when it suits them! Without 'calling' or changing the tone of my voice, just talking, I can say the word 'ball' and Meesha is immediately running round the house looking for (and usually finding) her ball! And if I happen to mention 'teatime', even in passing, suddenly the kitchen is full of cats!! They respond to stuff (as do humans, actually) that has actual
meaning for them. How often have you been at a party or another loud environment where all you can hear is a babble, but as soon as someone mentions your name your ears prick up? Same deal with cats!