My colleague Seth Weintraub hit a nerve — and stirred a fierce debate — Thursday with a post entitled Steve Jobs’ reality distortion takes its toll on truth, in which he called Apple’s (AAPL) CEO to task for what Weintraub saw as three deliberate distortions in Jobs’ iPad 2 keynote:

• Claiming that the iPad 2 is the first dual-core tablet to ship in volume
• Claiming that the original iPad has a greater-than 90% market share
• Misquoting a Samsung vice president about sales of the Galaxy Tab

Now, reasonable men and women can disagree about what constitutes shipping “in volume” or whether the Amazon (AMZN) Kindle and Barnes & Noble’s (BKS) Nook should be considered part of the tablet computer market.

But a quote’s a quote, and as it happens this one was recorded. So let’s listen to it here and take a look at what it means.

First, some context.

A couple months after the Sept. 2 release of Samsung’s Galaxy Tab — the 7-inch Google (GOOG) Android-based tablet that was its initial answer to the iPad — the company began to issue glowing sales numbers. In December it announced that it had sold 1 million Tabs, declaring sales to be “better than expected.” In early January it announced total sales of 2 million Tabs. Based on those numbers, according to one research firm, Samsung had managed to grab 22% of the tablet market.

But during the company’s Jan. 28 earnings call with analysts, a Samsung vice president named Lee Young-hee was asked whether those 2 million Tabs were shipped to retailers or sold to customers. Were they, to use her jargon, “sell-in” or “sell-out”?

The following Monday, the
Wall Street Journal
, relying on a third-party’s transcript of Lee’s remarks — which they had obtained from Samsung — ran the quote Steve Jobs used this week, in which Lee seemed to be admitting that although Samsung had shipped a ton of Tabs, actual sales were “quite small.” It was a killer quote that was widely reported — including by us.

But the transcript was wrong.

Later that Monday, Samsung put Lee’s recorded answer on YouTube and the Journal was forced to issue a correction. English is clearly not Lee’s first language, and the words she did use — “quite smooth” — don’t make a lot of sense. But anybody who listened to the recording — and in the aftermath of the Journal’s retraction, more than 10,000 people did — knows that she did not say “quite small.”

So how big a deal is it that Jobs tried to belittle and embarrass a competitor with a quote that had been, as Weintraub put it, “thoroughly debunked”?

Well, it’s not good. If he did it deliberately, it’s very bad form. If it was an error that somehow slipped through his fact-checkers, he’s probably not too happy about it right now. Asked how it happened, Apple PR issued a no comment.

On the other hand, if you read the entire text of Lee’s answer, it’s clear that there was something wrong with those initial sales numbers:

“Well, your question was on sell-in and sell-out,” Lee began. “As you heard, our sell-in was quite aggressive and this first quarterly result was quite, you know, fourth-quarter unit was around two million. Then in terms of sell-out, we also believe that was quite smooth. We believe as the introduction of new device, it was required to have consumers to understand this new device, so therefore even though sell-out wasn’t that, you know, fast as we expected, we still believe sell-out was quite okay.”

Bottom line: Samsung was disappointed.

Jobs was wrong to misquote Samsung’s vice president, and to milk it for the laughs he got. But his remark afterward — “So a lot of these [Galaxy Tabs] were probably on the shelf by the end of the year” — wasn’t that far off the mark.

Also on Fortune.com:

• Steve Jobs’ post-PC credo
• Apple’s ‘Speeds and Feeds’ is a preemptive strike
• Steve Jobs’ reality distortion takes its toll on truth

[Follow Philip Elmer-DeWitt on Twitter @philiped]