This picture belongs to "evilmini" on flickr.com
The ears of your budgies are covered by feathers. They are small openings behind the eyes.
Budgies have a well-developped hearing, since it plays an important part in communication with their congeners. They will also be able to recognize your voice after a short while.
In the ear, there's an organ of balance. When the ear gets damaged by an illness, your budgie won't be able to fly (well) anymore or keep his balance on the perch. If your budgie hangs his head a bit crooked, or if there are any other signs that he lost his balance, then you might have to take him to the vet.