I don't think that players strictly need a big flashing red sign saying "YOU LOSE!" when they have failed the puzzle, but rather the mechanics should allow them to gracefully revert and move forward again.
Take a look at how portal (Probably one of the most commonly known puzzle games that is so well executed) handles things:
The player either dies, and the level reloads for them (fell into fire, acid, allowed themselves to be shot too many times, or possibly crushed? I haven't played through in awhile and forget all the ways you can die), and this represents a 'hard failure'. This is opposed to a soft failure, such has dropping a block in acid, or passing it through the nullification field. You've screwed up, but it is fairly obvious that you probably weren't supposed to do that, and either they automatically give you a new tool piece to work with, or you have to manually go and press the button to get one yourself. (And if you try to request too many then it will very obviously destroy the previous one on you.)
Challenging is fun. Deciphering a complex system and working out a solution? That is interesting. Being frustrated is not fun. You don't want to simply hold the player's hand and make things a cake walk, but do make the process of moving through puzzle sections as streamlined as you can. Give them clear methods to reset or revert easily if they need it, and make cause and effect fairly obvious. (Don't have a button in a 3 stage puzzle that has a 'random' effect for example on the last room, but can only be pressed in the first.)
And avoid the 'false choice' effect in puzzles. If you have 3 'doors', two of which contain your death and one the solution, and zero information before hand about them, then you haven't actually given the player a choice. You're just slapping them in the face going "HAHAHA, I'm so much cooler than you because I'm the developer and I already know all the answers you stupid little twit" because they have zero useful knowledge to help them make a choice short of making a choice and then memorizing the outcome. If the only way I can pass a puzzle is by pure luck or having already failed in all the possible ways, then it is a bad puzzle because it is instead a memory/luck based obstacle that you grind your way through, not a puzzle which you actually devise a solution to.