Does anyone know when and how fail became a noun? I'd love to see one of those charts that shows the date of origin and subsequent growth of this usage.
"Fail" has existed as a noun and has been part of our lexicon for a long time, such as in the phrase "without fail." However, it gained a new meaning in the recent years with the fail Internet meme, where it started as an interjection first, capable of standing on alone in a sentence.
In fact, the first entry for "fail" to arrive on Urban Dictionary described fail as "an interjection used when one disapproves of something, or a verb" and one of the two examples cited was:
You actually bought that? FAIL.
If the "FAIL" above was a noun, that sentence would not be syntactically correct. Nouns cannot be used in that manner. It would be like saying:
You positioned your lips to form an upward curve? SMILE.
We understand what is meant but it's not syntactically correct. No one with a good command of English would ever say such a sentence. A correct way to articulate the thought while keeping "smile" as a noun would be to say:
You positioned your lips to form an upward curve? That's a smile.
Therefore, the fail in the Urban Dictionary example is an interjection.
It's only afterward, probably through misinterpretation of the meme, that it came to be used as a noun. When you look at an image with only "FAIL" written on it, it's impossible to tell whether fail is being used as a noun or an interjection:
As for the origin of the meme itself, which I assume is your original question, the origin most often given (by Know Your Meme, Slate, and the New York Times) is that it comes from a poor Japanese-to-English translation of the game Blazing Star.
Ben Zimmer of the New York Time says:
This punchy stand-alone fail most likely originated as a shortened form of “You fail” or, more fully, “You fail it,” the taunting “game over” message in the late-’90s Japanese video game Blazing Star, notorious for its fractured English.
For reference, here's Blazing Star's game over message:
The recent uprise in incidences of non-verb fail is due to its being an internet meme, possibly from a Japanese video game with poor translation to English. Know your meme.
Although "fail" has been used sparingly in the past as a noun (e.g. "without fail"), there is evidence that the word is creeping toward ordinary usage as a noun to replace the word "failure." I just read the following headline in Bloomberg Businessweek (6/6/11-6/12/11 issue): "How Stephen Elop is trying to lead Nokia past its epic fail." My first reaction was that perhaps the word is only used to draw attention in headlines, but that it would not breach the body of the article. Well, the word did appear once inside the piece.
"Fail" (as an ordinary noun) is coming into our campsite, ladies & gents. Hey, compared to "refudiate," it's a gem!
Some hypotheses are listed and briefly analyzed in this Slate article.