I am using MikTex, and reduced the problem to the following document:
\documentclass[12pt, a4paper]{article}
\usepackage[T1]{fontenc} % this causes the problem
\begin{document}
Lorem ipsum dolor .....
\end{document}
If I compile this document using pdflatex test.tex and then open the resulting PDF in Google Chrome it looks like this:

Here's without \usepackage[T1]{fontenc}:

Needless to say, the latter looks a lot better. What could be causing this?