Physical failures are when the media has had a circuitry and/or mechanical failure. In the case of hard drives, the circuit board firmwares can become corrupted or shorted out by a power surge. The heads that read/write the data can also be affected and fail.
When the heads of a hard drive fail they can land onto the platters where the data is stored and shear away the media (your data).
This doesn't happen in all cases, but if it does and the damage is minimal, data can still be recovered. Heads and circuit board failures typically require replacing the failed parts. The drive is rebuilt and brought to a temporary usable state and then the data is recovered. This work must be performed in a Class 100 Clean Room in order to successfully recover your data.