The real slang fail actually comes from party foul. It is commonly used when something goes wrong or does not fit the atmosphere of the situation. "Party Foul" is basically now being replaced by "FAIL" (Search Party Foul).
if someone spills beer -- "FAIL"
if someone breaks something -- "FAIL"
if someone embarrasses themselves -- "FAIL"
if someone does anythingwrong -- "FAIL"
a congratulatory motion combining a knuckle-touch and a hi-5; one person holds out their hand in a motion as if they are giving a hi-5 while the other punches the palm of their hand
*Person A raises hand to give hi-5*
Person A: "Great Job!"
*Person B punches person A's palm*
Person B: "Hey, thanks man!"
*they have completed a 'fail'"