The Memo controls are quite simple-minded and, generally, refuse to show anything other than printable characters. That doesn't mean that the characters are not there in the underlying text, just that the memo won't show them so a line aparently blank may well contain something you're not being made aware of.
This is almost certainly what's happening to you: something is being read (from a database?) that aren't printable characters and while the memo simply don't show it
TextOut() tries, nonetheless, to print it out to the printer.
ETA:
jamie, you're right. I made some tests in Windows (XP and 7) and it seems the only way to get the strings as they really are is by reading
Text. Duly noted, sir!
(In Linux/GTK--and other *nixen, I suppose) it works as it should: reading
Lines[] or
Lines.Strings[] gets the full, unwrapped line).