It happens. Often incompetence is specific to one specialty - neurosurgery is competitive, so you can assume that anyone who gets it has at least adequate grades/test scores. But that doesn't mean that they're clinically worth a damn.

I'm an anesthesiologist. There are people who wash out because they just don't have the temperament for it. They're not dumb, they're not even bad doctors, they just aren't mentally equipped to sit back and relax while running a code.