They exchanged a few words in what sounded like Spanish.

Why? It sounds just fine as -is.

I don't understand what it means. Does the sentence mean "They exchanged words to understand what Spanish sounds like." ?

They briefly conversed in a foreign sounding language that might have been Spanish.

Ah, I see the question. Each language has it's own cadence and typical sounds. Spanish doesn't sound a bit like German or Chinese when all are spoken by native speakers

I have heard some nonsense monologues that sounded very much like English that didn't contain a single real word from English or any other language. Your sentence just means the conversation sounded like Spanish, without any words being understood.

the person making the statement overheard two people speaking in a language he didn't understand but thought might be spanish

Living with the Puerto Rican I hear that all the time. First he starts out talking in English then throws a few Spanish words in the conversation. At least I think is sounds a bit like Spanish.