First off, recognize that peer review is a deeply flawed process, but it's generally less bad than no peer review. Peer review is primarily capable of catching methodological flaws, and of improving how the results are contextualized relative to prior art. Peer review does
not imply replication of claimed results. In this case the original author falsified data, intentionally misleading the reviewers. The methods described in the papers were untruthful, which is much more challenging to catch than merely poor methods. In the end he was caught because of the non-random structure of falsified experimental noise in his data across multiple experiments. That, in combination with others' inability to replicate the results, caused the results to be retracted, and the author called out for the fraud. It may not have been feasible to recognize the fraud in any individual paper.
This appears to have been an extreme case of scientific misconduct. Many less egregious cases are never caught. And many unintentionally flawed papers are never caught as erroneous. But the overarching trend is an increase in the body of knowledge. Peer review is just one component of society's scientific research infrastructure, critical yet inadequate by itself.