Birds do have ears, but what they lack is an auricle, the external portion of the ear that collects and focuses sound into the ear canal. The ear-like feathers atop an owl's head are not located near the actual ear openings and are for display, not collecting sound.
The ear openings of most birds, including owls, are located very close to the eyes. They are slightly behind and below the eyes and often look like tiny pits in the bird's skin. These opening are sometimes covered by a valve called the operculum, but they are almost always hidden behind feathers to protect them from turbulence while flying. Despite lacking auricles, birds have extremely sensitive hearing and can process sound faster than human beings.