In Pokémon Ruby, Sapphire and Pokémon Emerald, the Wally defeating Ralts oversight refers to a set of very unlikely circumstances that allow Wally's Zigzagoon to faint Ralts during the demonstration near the beginning of the game in which he is supposed to catch a Ralts.
For this to happen, Zigzagoon needs to have 11 Attack, and Ralts needs to have 17 HP and 6 Defense (possible by rolling low IVs for both stats in conjunction with a Defense-reducing nature). This causes the maximum damage from two Tackles to be 10 and 7 (the second one through an Attack modifier of -1 from Ralts's Growl). Notice that critical hits are disabled for this battle, so those extreme stats and damage rolls are the only way to faint Ralts.
When this happens, Zigzagoon will gain experience, and the battle will end as if it were a normal wild encounter, skipping the scripted section where Wally uses a Poké Ball in his bag and catches Ralts. However, the game is not otherwise affected (e.g. after exiting to the overworld, Wally will still declare "I did it... It's my... My Pokémon!", and in later trainer battles with Wally he will still use a Ralts or a Gardevoir).