The Fallback policy in Polly is used to handle failures that cannot be recovered from by implementing fault tolerance in distributed systems. It provides a last line of defense by executing a specific action when all else fails, such as logging or notifying an admin. The Wait and Retry policy is combined with the Fallback policy to retry failed requests and provide additional resilience. A policy wrap allows multiple policies to be combined and executed in series, enabling flexible fault tolerance implementation. By using the HttpClientFactory pattern, instances of HttpClient are created that execute the WrapOfRetryAndFallback policy handler, providing a robust way to handle failures in service-to-service communication on the web.