Why has the idea of ‘fail’ risen to prominence in the murky soup of web culture? It obviously originated with the idea of applying the term ‘FAIL’ (and, later, ‘EPIC FAIL’ to photos of screw-ups, accidents and douchebaggery. In one sense, it’s just a more distilled version of America’s Funniest Home Videos, except ruder and more sardonic.
I wonder where that practice began? Usually these memes start in an obscure online discussion group, but my 76 seconds of research couldn’t turn up anything definitive. This sounds like a job for Anil or Andy, master investigators of internet memes.
The ‘fail’ meme feels like a distant cousin of LOLcats, as well as demotivational posters. Oddly (or not), there hasn’t been a similar plague of images tagged with ‘SUCCESS’ or ‘WIN’.
In any case, it’s spawned a number of blogs, including FAIL blog, Shipment of Fail and Fail Dogs (there are also, I’m sure, Fail Octopi, Fail Emu, and so forth). The infamous Twitter-is-b0rked image is known as the Fail Whale. And now, at long last, there’s Fail Camp in Philadelphia. From the camp’s Upcoming page:
This isn’t about finger pointing. It’s about having a safe place to admit YOUR mess – ups, small and large and most importantly, what you learned.
We all make mistakes. The best of us learn from them. The best of the best help others learn from their mistakes.
These can be business failures. These can be life failures. We want your fail.
To paraphrase good ol’ Santayana, those who fail to study failures are destined to repeat them. Or, as George Bernard Shaw once said, “my reputation grows with every failure”.
DarrenBarefoot.com 
While not as prominent as fail, especially on the images front, as it does remain mostly a text based meme, there is “FTW” or “For the win!” which is antithesis of “Fail”…
Adding to Michel’s comment, there is also FTL or “For the lose”, which is equivalent to Fail.
I suspect it originated on 4chan(.org – enter at your own risk) just like the lolcats. The number of inside jokes on the internet is getting so large that even when they “go mainstream” they’re still limited to certain “communities” and demographics. The internet is no longer something that any one person can understand.
Definitely proliferated by 4chan, if not originated.
Also, try searching for “win”, if you find all the “fail” stuff depressing.
I also wanted to mention FTW as the equally annoying and seemingly as ubiquitous on Twitter as FAIL.
I don’t know much about those websites but the Fail Camp sounds to be like the way you raise Gen Y’s: Celebrate mistakes! Reward participation! Like the way some children’s soccer leagues did away with scoring and winning and losing. Only one person or few people can “win” so the rest of the people have to get together to have a party.