When you misunderstand a point someone is trying to convey through an all text medium (cell phones, internet chatting, etc.) because you are unable to see their body language, or hear the fluctuations in the tone of their voice.
I messaged her saying I was going to kill her, but my sarcasm was lost in textlation. Now I have been arrested for threatening her life.
When someone receives a text and twists the message into something different than what the sender was intending. Too many text creates a convoluted message. Clear communication is not happening and both texters become frustrated/mad or an array of other emotions.
Ranging from sending a text and not receiving a reply soon enough or attempting to have a conversation through a chain of texts. This is when one can get Lost in Textlation.