Faradaic losses are experienced by both electrolytic and galvanic cells when electrons or ions participate in unwanted side reactions.  These losses appear as heat and/or chemical byproducts.
An example can be found in the oxidation of water to oxygen at the positive electrode in electrolysis. Some electrons are diverted to the production of hydrogen peroxide. The fraction of electrons so diverted represent a faradaic loss and vary in different apparatuses.
Even when the proper electrolysis products are produced, losses can still occur if the products are permitted to recombine.  During water electrolysis, the desired products (H and O), could recombine to form water.  This could realistically happen in the presence of catalytic materials such as platinum or palladium commonly used as electrodes.  Failure to account for this Faraday-efficiency effect has been identified as the cause of the misidentification of positive results in cold fusion experiments.
Proton exchange membrane fuel cells provide another example of faradaic losses when some of the electrons separated from hydrogen at the anode leak through the membrane and reach the cathode directly instead of passing through the load and performing useful work. Ideally the electrolyte membrane would be a perfect insulator and prevent this from happening.
An especially familiar example of faradaic loss is the self-discharge that limits battery shelf-life.