Remember that ReductionMatrices_Calc is not a known "word" in the language your using (...anywhere, for that matter). So, without any indication of hyphening pattern, TeX won't do anything. The easiest solution would be to slightly rephrase the paragraph so that it doesn't put ReductionMatrices_Calc around the line-break. Perhaps
The function \ifuncname{calcMatrix} in the class \ifuncname{ReductionMatrices_Calc}
implements the algorithm ...
Finally, while it doesn't really make a difference here, you could also use the following implementation of \ifuncname:
\newcommand{\ifuncname}{\lstinline[style=inline-funcname]}
Note that I've removed the argument capturing of \ifuncname, relying on the replacement text to take care of that. This is sometimes helpful when dealing with category changes in macro arguments. However, listings handles these quote well.
Following some ideas from Underscore makes text go past end of line into margins you can also issue a \linebreak:

\documentclass{article}
\usepackage[margin=1.5in]{geometry}% Just for this example
\usepackage{listings}
\lstdefinestyle{inline-funcname}{
columns=fullflexible,
breaklines=false,
%Note: \usefont{OML}{cmm}{m}{it} is exactly like \mathnormal
basicstyle=\usefont{OML}{cmm}{m}{it} %\itshape\ttfamily
}
\newcommand{\ifuncname}{\lstinline[style=inline-funcname]}
\begin{document}
\noindent
This algorithm has been implemented in the function \ifuncname{calcMatrix} in the class\linebreak \ifuncname{ReductionMatrices_Calc}
in the file \verb|algo_cpp.cpp|. All the state and parameters are stored in the class so that we
need to copy as little data as possible for successive $S \in \mathcal{P}_2(\mathcal{O})$. That is also why the iteration
through different $S \in \mathcal{P}_2(\mathcal{O})$ (see section~4.4) has been done in C++.
\end{document}
RedutionMatrices_Calcis not a known "word" in the language your using (...anywhere, for that matter). So, without any indication of hyphening pattern, TeX won't do anything. – Werner Jun 11 '13 at 00:51The function x in the class y implements the algorithm ...– Mensch Aug 12 '13 at 14:35