|(pic from ntworld.com)|
John: "What is it?"
Andrew: "It's binoculars."
Andrew: "It is binoculars"
John: "Can you spell it?"
John: "What is it for?"
Andrew: "Something that we use to see things far away."
John says "sorry?" in the conversation to show that he doesn't hear what Andrew said or he doesn't know what Andrew talked about.
"Sorry?" means we want someone to repeat his/her utterance so we can catch what he/she means.
Here are some other examples of the expression of asking repetition:
I beg your pardon?
Could you repeat that, please?