I guess the older, preferred trick is the use of sic (Latin 'thus') to indicate the a word was misspelled or is being used improperly.

As for the pronunciation of '^H', I just hear the sound of the backspace key being hit.

For the record, I first heard the term used back in my college days in a philosophy class. BTW, Derrida has a great little monograph on using quotation marks, quoting, citing, etc. I think it's in ABC, Limited, Inc., his hilarious sendup of Searle on Austin.