Haha, Ryan's very correct here.
I couldn't see the screenshot very well, I thought letters were being cut off/covered up.
Instead, you have floats, but without stated widths (on the li's). And overflow: hidden on someone. So, the #2 item is floated, but isn't taking up ALL the room, meaning there was still some room for the #3 float to try to squeeze in there... basically, #3 is snagging on the bottom of #2 instead of just starting on a whole new line. Then there's the side padding inside that li, and the letters are gettting cut off on the right from the overflow: hidden.
You'll see this if you add the ugly colours : )
If you like them floated for whatever reason, you can keep that, but set a width on those li's then. Make them something less than 100% since you have sidepadding.
If you remove the float as Ryan suggests and let them go back to being blocks, they'll be 100% wide by default and can't even try to stack up along each other.
So, either one should fix it, and still look ok in all browsers. IE <8 has a float-ride-up bug that I get when I have floated definition lists.
BTW, your lists have numbers as they are ordered lists (it matters what order the list items come in). Why not make those OL's and just remove the list-style so that the element you're using has better semantic meaning? You'd keep your current numbering in the content, if you want. IE has plenty of list-item bugs anyway : )