Appeasement failed because the appeasers misunderstood Hitler's ultimate goal of Lebensraum. Chamberlain believed negotiating around the table with Hitler could settle Germany's grievances from the Treaty of Versailles. However Chamberlain and the other appeasers did not comprehend that Hitler's goal was not just the destruction of Versailles but the construction of a Eurasian Greater Germanic Reich. Although in Mein Kampf Hitler had made this clear, in his public utterances as Fuhrer he preached peace and fairness (i.e. Germany should be able to rearm if France and Britain do etc). Many appeasers took Hitler at his word when he proclaimed that he had no more territorial demands.

The aim of appeasement was for Germany to become a legitimate member of the international community by revising Europe's borders to undo the Versailles system by allowing German minorities to become part of the Reich. Appeasement also entailed legitimising German rearmament (e.g. Anglo-German Naval Agreement) to prevent an arms race as was seen prior to the Great War. Appeasement failed because Germany's aim was not to become a peaceful state after destroying Versailles; the destruction of Versailles was merely the first step on the road to Lebensraum.

Sources: Correlli Barnett wrote a tome covering the roots of appeasement and the diplomacy of appeasement from the British POV in his The Collapse of British Power (London: Eyre Methuen, 1972). It's a very perceptive work. For Hitler's aims, see Ian Kershaw's enormous two-volume biography, Hitler 1889-1936: Hubris and Hitler 1936-1945: Nemesis.