Cessna 172 pilot reported a ground conflict when a communication error resulted in the pilot taking another aircraft's takeoff clearance. The pilot stopped the aircraft after crossing the hold line; then taxied off the runway for a proper takeoff clearance.

Narrative

I was holding short of runway XX/XY at taxiway 1 I did not notice a Cessna 170 holding at XX/XY on taxiway 2. Tower gave immediate takeoff clearance on runway XX to the Cessna 170 I heard a letter of their N# takeoff clearance and as my N# shortened is similar; I acknowledge the takeoff and began rolling as there was an aircraft on approach to runway XX inside of 5 miles. AS I looked to the left as that was the direction I would be going I noticed the Cessna 170 as he was moving at this time too. I immediately applied max brakes and closed the throttle By the time I came to a stop My main wheels had just crossed the hold short line. I was ablate do a 180* turn from that ponit and return back to taxiway 1 It did not appear to me that the 170 had entered the runway at any time. The landing aircraft was about 2 miles out on final by the time all this transpired and was able to make a normal landing with no abnormal maneuvering required. The Cessna 170 was then cleared for takeoff and shortly afterwards I was cleared for takeoff. The remainder of the flight was uneventful.