A mondegreen is the mishearing or misinterpretation of a phrase, typically a standardized phrase such as a line in a poem or a lyric in a song, due to near homophony, in a way that gives it a new meaning.
It derives its name from Sylvia Wright's mishearing of the last stanza to the ballad "The Bonney Earl O'Moray:
Ye Highlands and ye Lowlands,
Oh, where hae ye been?
They hae slain the Earl O' Moray,
And Lady Mondegreen.
The actual fourth line is "And laid him on the green".