The ability to separate people's voices from background music quite often gets worse as we age, so in part, it may be so that it is easier to have a conversation while the music is playing.
In terms of the biology, what happens is that as you age, you can't hear very high pitched sounds so well because high pitches use parts of the ear that are much more delicate, so they age faster. The bits of the music that you can still hear OK happen to match up with the frequencies that are in our voices. So the music and voices get mixed up more easily than when you're younger.
And yes, those delicate parts do get damaged by listening to very loud music as well as just age, us older folks aren't just saying that because we don't like youngster's taste in music!
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