I recently had a technical phone interview where I misunderstood the question being asked but coded my version of the program correctly (in collabedit). It was too late in the interview before he told me I had implemented it incorrectly but asked me to continue my version. Will this negatively effect my chances of being called to in-person interviews? Thanks.
It's impossible to know without knowing the company, but yeah, I'm sorry but it probably will affect your chances. Programming isn't just about knowing your language, it's about understand what the requirements are and what you're trying to build.
Next time, ask them to write it down, or type it up yourself in collabedit or somewhere before you start coding and ask them if you've captured the requirements correctly. You won't lose any marks for confirming the question.