"Fail" is a word that is more than often overused online. Unfortunately it has spewed into mainstream society and now is being used in every day life, much like "epic".
People who "fail" generally are not even trying to accomplish anything, or they simply do something different than you. This word is most commonly used by annoying teenagers (who put a bad reputation on gaming), who shout "FAIL!" every time someone makes a slight error.
If you point out an obvious flaw by saying "FAIL" you're obviously a failure yourself, for lacking any sense of logic.