Research for the Concise Oxford Dictionary found that most people have learnt the difference between its and it’s (only 8% got it wrong), yet many people still get confused by words that look alike but have different meanings.
For example:
A coach can diffuse the situation by praising the players. (50% incorrect)
A taxi driver had free reign to charge whatever he liked. (26% incorrect)
Some pointed to his refusal to tow the line under Tony Blair. (21% incorrect)
He spent his evenings pouring over western art magazines. (12% incorrect)
Correct answers: defuse, rein, toe, poring.
http://www.askoxford.com/pressroom/archive/coed11 (PDF)
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