When Craig Federighi picked up the iPhone X to demo Face ID, it didn't unlock the device. He put the iPhone to sleep and retried but it still didn't work and he was asked to enter a passcode.
Yahoo's David Pogue was able reach Apple for an official explanation:
Tonight, I was able to contact Apple. After examining the logs of the demo iPhone X, they now know exactly what went down. Turns out my first theory in this story was wrong—but my first UPDATE theory above was correct: “People were handling the device for stage demo ahead of time,” says a rep, “and didn’t realize Face ID was trying to authenticate their face. After failing a number of times, because they weren’t Craig, the iPhone did what it was designed to do, which was to require his passcode.” In other words, “Face ID worked as it was designed to.”
It's pretty unfortunate that this happened during the world debut of the feature. Take a look at a clip of the moment below!