I thought the military also used a variant of this - interesting that is "such a strange concept".
They also seem to be about to change this [1].
[0]https://en.wikipedia.org/wiki/Up_or_out#Military
[1]https://www.armytimes.com/news/your-army/2019/01/24/up-or-ou...
So yes, if you are not promoted, you don't get to stay - you are actually fired.
They have modified this for some positions like flight instructors who they want to keep. But in general it's up or out in military - that means fired before you get your pension.