Stainless steel can and does rust.
Whoever named stainless steel must have been an optimist. Stainless steel certainly can and does rust, though if you know why, you can avoid using it in places where it's less suitable. Most marine-grade stainless used on production boats is from the 300 series. Type 304 is a good multipurpose steel. The Gateway Arch in St. Louis is clad with 304. Types 316 and 316L have a slightly higher nickel content and added molybdenum to improve their corrosion resistance over 304 — especially with regard to pitting and corrosion in saltwater environments. There are higher grades as well, such as the type used in dental implants. Most boaters will opt for Type 316 and 316L.
The key to stainless steel is that the chromium in the steel combines with oxygen to form an invisible surface layer of chromium oxide that prevents further corrosion from spreading into the metal's internal structure. Stainless steel actually protects and repairs itself, except in areas where there is a low level of oxygen, such as a stainless-steel screw in a damp deck core. This kind of corrosion is referred to as "crevice corrosion." It can eat into the stainless, causing great weakening. In some cases, cheap plated steel or zinc fasteners are mistaken for stainless steel and then cursed when they begin to rust or crumble. Use stainless steel where it won't be starved of oxygen, and get high-grade stainless fittings from a known supplier. Stainless steel that is attracted by a magnet is not what you want to use on a boat.