I don't have the rulebook (yet) ... but from what I've read on these forums, here's my understanding.
Sample scenario: The players are looking for a secret door.
The obstacle and test: searching for the door.
Possible outcome 1: Search check succeeds. The players find the door.
Possible outcome 2: Search check fails. But the GM can't just say "oh well, you needed to find that door to get into the dungeon. Too bad. See you next week." So ... he puts in a "twist": An enemy team comes up -- maybe they reveal the door, or after overcoming the enemy team, the players find a map of where the door is.
Possible outcome 3: Search check fails... but that's because they didn't find the trap. The trap goes off ... in other words, a condition is applied to the players.
And really, this set of outcomes is not unique to Mouse Guard. A similar set can be used in D&D, and just about any RPG.
There is, of course, a 4th outcome:
Possible outcome 4: Search check fails ... the players also fail the followup twist, and perhaps the twist after that. They fail so badly, that they fail the entire mission. Friendly GMs would say "your patrol is left in the wilderness for dead, and you are rescued back to town by the follow-up patrol that Gwen sends after you." Cutthroat GMs would say, "you guys died. Hmmm, we still have two more hours of gaming to go ... wanna make new characters?"
So, I would have to say that there is a possibility that the players really, really, fail ... and the game can come to an abrupt end. But for the most part, they simply have to "pay" the costs of failure ... and the game goes on.

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