Not sure whether this has already been reported, although I couldn't find it in the List of Known Issues. I think this is new since the 1.3 patch, although I could be mistaken.
I'm finding that the item description displayed on the looting screen is correct (for example, might show Imoen's name instead of the quarterstaff I am hovering over). However, if I press tab AFTER the looting screen is opened, the correct item description is displayed.
To reproduce: 1. Kill a monster. 2. Press and hold TAB. Do NOT release it. 3. Click the loot dropped by the monster. Do NOT release tab. 4. Hover over some loot.
If I press tab AFTER opening the looting screen (ie. do not hold TAB when executing step #3 or release and repress TAB after executing step #3), the correct item description is displayed as in the following screenshot: http://i62.tinypic.com/vcwb60.jpg