Assuming there's not some other reason that someone wouldn't want to be "more than friends" (for example, working together or one/both already being in a relationship/marriage), "Friend Zone" can happen when one person really likes/cares about the other but just doesn't happen to be attracted to him to see him as "more than a friend". It doesn't even have to mean that the other person is not attractive, or that (in the case of the guy who in the "Friend Zone") the woman doesn't find the guy attractive for someone else. She just doesn't find him attractive according to her own, personal, "thing" about who/what she finds attractive in a potential "more than friend".
It's what can be behind the thing, "It's not you. It's me." The "it's me" part of that often amounts to "I know you're a great person (and even a very attractive person - for someone else); and I feel like a crazy or stupid person for not being interested in becoming more than friends with someone who has as much in his favor as you do (and even someone I care about so much), but you aren't the type of person I'm attracted to for a more-than-friends relationship."
There's a joke about how when women say, "It's not you. It's me," they really mean "It's you." - and they often do mean that. The trouble is a lot of compassionate/caring people aren't going to say something like, "I, personally, don't find you appealing/attractive for me." Compassion and caring aside, a lot of people are well aware that they "aren't exactly specimens of perfection", so there may be a "who do I think I am to reject him/her" kind of thing that makes a person feel too uncomfortable to just out-and-out say what the problem is.
Some people (men included) have a narrower set of personal/physical traits required before they'll find someone physically attractive (and again, not necessarily "attractive-in-general" - just attractive to them). Then, though, some people (not all) will add less personal "attributes", such as a person's job, or ambition level, education level, interests, general behavior, etc. to their list of what they factor into what would make a person a potential "more-than-friend".
Women generally place tremendous value (and even love into) the close, special, relationship between friends; so being loved as "a friend" shouldn't be underestimated. I think, though, that such a friendship can only be healthy when one person isn't settling for being a friend when s/he really wants more than that.