How are humans able to read scrambled text/characters (e.g., CAPTCHA)?
A human brain recognises letters by their constituent features (sub-letter parts). It is modelized by a pandemonium model where printed information is extracted locally then globally. In the letter recognition literature, this type of feature-based hierarchical model competes with template matching theories (with an advantage to the pandemonium-like models such as deep-learning networks).

 

Scrambled characters are recognised the same way, with the difference that only part of the visual information is available. It relates to the theory of geons developed by Biedermann (Recognition by components, 1987). He wrote 


  if an arrangement of two or three sub-components can be recovered from
  the input, objects can be quickly recognized even when they are
  occluded or extensively degraded.


Could you identify the following object? Left is the unrecoverable version. 



REF:


Grainger et al (2008). Letter perception: from pixels to pandemonium. Trends in Cognitive Science.
Biederman, Psychological Review (1987) &amp; http://en.wikipedia.org/wiki/Recognition-by-components_theory