Usually with hostas (funkia, plantain lily) this is caused by slugs feeding at night. Check out my slug web site (yes there is one for most anything) on my links page. Many have success just putting a board in the bed which they crawl under during day, and you can then find and remove them. There are poison baits, but these can kill domestic pets as well. The most popular remedy is saucers of beer, which attract slugs, and then they drown. The most effective though is probably copper strips-- slugs wont cross them as they get shocked. Keeping lower leaves off for more ventilation, and mulch removed for less dampness, help as well.