I've actually had that question a few times in an interview. It's usually phrased as, "Name a time when you didn't complete a project or failed to meet a deadline". Interviewers know that you are not perfect and are interested in:
1) Whether you are honest about your answer
2) When you realized something wasn't working, how you handled it.
I was working on a software implementation and was the leader of a team that worked with the project managing team helping our company implement the software. I was young and inexperienced and let the project manager lead the steps, even when I felt that we were not headed in the right direction. Several times I made some comments but I didn't push the issue. Finally, I knew something had to be done and sucked it up and went to my boss. Explained that the process we had designed wasn't going to work and that we needed to stop and start over. I was required to go to my boss's boss as well as present my case in front of the conversion team directors.
Long story short, they agreed with me about starting over and removed the assigned project manager and assigned a new one. We were able to finish the process only 2-3 weeks behind schedule. What I looked on as a failure at the time, was something that I took with me and learned from later on in my career.