I just lost an item on which I had a max bid of $120. The winning bid by someone else was also $120. The status report says that I was outbid. I entered the max bid an hour or so before the deadline. Please explain what might of gone wrong. Thank you.

PS: Item number is 130704584122

You were outbid because someone else placed a manual bid at the same exactly amount earlier.
When amounts are the same, eBay takes earlier bid.

That's why it's important to snipe using 120.02 or 120.03 to win in those situations. A few extra cents will not make a difference for your budget, but will increase your chances of winning.