I’m sure TV Tropes has an entry for it, but I don’t know where to start looking.
Character A uses a big word. Character B mistakes that word for something else- usually a disease or sexual act.
Examples:
From Night Watch:
Carcer: Is he charismatic?
Nobby: Don’t know, never heard him cough.
From Origin of PC’S:
Durkon: I’ve come from tha land o’ tha dwarves to liason with your leaders.
Man: You want to do WHAT with our leaders?
Woman: Ew, grosss.
From the Perfect Master:
Vaguely Important Looking Person at party: “I thought Demi Moore gave a compelling performance in Striptease.”
You: “Goodness, you must be an anosmic ageusiatic.”
VILP: “No, actually I’m a Presbyterian from Cleveland.”
The gold standard here would be the (probably apocryphal) election campaign of George Smathers: