It's an interesting question. I'd ask - who told you that? It would even more interesting if any public school district said publicly they had a 'No Fail Policy'. The intention behind the current No Child Left Behind Act could be said to be a kind of 'no fail' policy but in reality, there is still failure in our schools.
And I'd suspect in your school too -even if they would remarkably have an openly articulated 'no fail' policy. But I would doubt very much that they do.

As to why students are 'pushed through' in any school - we simply don't seem to know yet how to successfully teach so that all children can learn. We try many different things but there are still many children that do not or cannot learn in school. We have know that 'holding them back' is not the answer. The children we hold back are most often found at the end of the next year to still not have mastered the material.
If we held every child back in 3st or 4nd or 5rd grade who was not reading at grade level and kept holding them back until they were reading at grade level, we'd have 16 year olds still in 3st, 4nd and 5rd grade classrooms. Because no school knows how to teach all children yet, some schools quietly push students ahead in the hopes they'll catch up and in the certain knowledge that no parent wants their 3rd grader to be sitting next to a 16 year old teenager and one who hasn't learned to read yet.