High intensity sound is received by the cochlea (the organ of the inner ear) and stimulates the hair cells there as with all sounds. The problem with very loud sound is that it causes stress to these delicate hair cells, resulting in a biological cascade which ends with apoptosis and necrosis (types of cell death).
Theories on how the damage is done include inflammation, reduced blood flow and oxidative stress also (the free radicals you may have heard about). Genetic factors are also in play, meaning that some people are more affected than others even if they are in the same noisy environment.
Physically, the ear canal amplifies the 4kHz frequency most effectively. This 4kHz region is therefore often the most damaged in the cochlea, producing a ‘notch’ on the hearing test which indicates Noise Induced Hearing Loss (NIHL).
With dead or damaged hair cells, the cochlea is unable to amplify and transmit electrical nerve signals to the brain, so although sound is received into the ear mechanically, it cannot be transmitted electrically in the way the brain needs, and you therefore can’t detect it.
Research in recent decades has led to a more thorough understanding of the long term effects of NIHL. High level sound during the early working life can be undetectable on hearing tests at the time (or can give a temporary hearing loss which recovers), but result in damaged hearing in later life. Specifically, the ability to pick out one voice from background noise is impacted, so even though we can amplify sounds with hearing aids, the person still struggles to make sense of what is being said.
Therapies such as N-Acetyl Cysteine and Q10 antioxidants are being studied, to see if they have a protective effect on the cochlea. But as always, prevention is far better than cure, so educating the public on damaging levels of sound and how to protect against them are key.