I imagine it's more a sense of body language and certain beeps and tones? Like when you whistle, given the context and the situation, you can kinda get what the droids are saying, but the communication seems more useful droid to droid.
In Luke's X Wing it seems like its translating when he's talking to him.
How can a bar in some rundown area afford a cantina band when audio recording technology must be way ahead of what we have here (a long long time later in a galaxy far far away)? How can a race require contestants complete it in a minimal number of parsecs? How can Kenobi and Luke be hotter than Solo thought when he already knew they were wanted by the Empire? How can the good guys call themselves good guys when droids are clearly sentient but are treated like any other machines? I.e. the good guys have slaves