He's likely breaking a FCC anti-interference law (with older equipment probably). Radio waves have harmonics like instruments do, sort of. So you repeat your transmission quieter and quieter on some surrounding frequency.

You can hear it because your headphone wires will pick up wavelengths about the same length (ever heard of people making AM radios with wire and a tin can?). My understanding and I hope I can be corrected if wrong is that this only will work for FM transmissions.

I've heard the best thing to do in these situations is to politely inform your neighbor of the situation and to investigate a solution. Probably some filter on his transmitter would do the trick. But I'm sure if he's serious about radio, he'll have a grand time fixing it...