So from what I understand, yes, if you're shamed in a contest, you can join a later contest and get out.
If you fail three contests in a row, you're triple shamed and are essentially banned from joining contests, with a few rare exceptions.
If you are triple shamed and are given special permission to join a contest, you are sentenced to the 9th circle, which is account deletion.
Detroit is for moderators who are too valuable to the site to get deleted due to their contributions. TBH I have no idea what this entails, and if you're not a moderator it's not really relevant.
Now, this system is actually kinda fair. You can be double shamed and submit a valid entry, which will get you out of the shame pit. You have three (sometimes four) chances to fuck up, and only need to do what's expected of you once.
Some site members spend years in the Shame pit, get out with a clean slate, then immediately get tossed back in at the next contest (looking at you Suranna).
Only real complaint I have is that mods tend to be a little slack on actually submitting valid entries, but considering their heavy workload and their efforts towards keeping the site running, it makes sense.
Unless you're Ford. He joins knowing damn well he's not gonna submit something. He has permanent residency in Detroit at this point, but he handles the site's code so we kinda have to keep him here.