I want to expand on the excellent Russell's answer, which I gladly upvote. I am by far not an expert in spaceflight either, but I happened to take part in a lab operation emergency handling, and used to carry a pager with a huge internet operator. Any such event, a space launch more so, but also industrial or even computer operations, has a rehearsed plan and requires orchestrated work by many people. When you are at a position, it's a stressful situation, and there are natural cognitive changes in response to this stress. Your mind narrows, and you become a mere function, focusing on performing your tasks correctly and timely, than a sentient participant of the whole process. In cognitive psychology this state of being hyperfocused¹ is sometimes associated with the flow. If an alien saucer lands before your eyes at this time, it will take you a quarter minute to react, provided you would react at all. For some people (me included) stress in an inducing factor for the flow, while for others it's the deal breaker. I can make an educated guess that people of the former personality are more likely to find themselves in the mission control center, and the latter at a desk proving theorems or, since this is Space.SE after all, designing rockets, in other words, amusing themselves with jobs involving equally deep concentration but not so much stress.
At this time your mind is not reacting even to strong stimuli not related to your work. I think this video is an excellent illustration of this phenomenon. First, note that the announcer(?) reports "engine power at 108%" overlapping the report you noticed, and, while the avionics position may have looked at their screens, the announcer should have seen the vehicle exploding! And he still continues to report the engine power reading. Even a rocket explosion will take many seconds for a human in this state to derail them from their going with the flow.
Also notable here is the time it took the mission director to announce the emergency procedure. His "Launch team, launch team..." starts at 4:36 in the video, the whopping 18 seconds lag after the clear visual of an anomaly! This is despite the fact (or, at least, a very reasonable assumption) that in his training he rehearsed a catastrophic vehicle failure at launch a dozen times.
But yeah, all this scientific babble aside, the TL;DR is everybody was just too busy to notice that the rocket blew apart!
¹ Do not confuse with the usage of the same word in clinical psychology and psychiatry; I am speaking about the “good” hyperfocus which most people experience at times, not “off-nominal” hyperfocus, which these guys deal with.