I recently talked with a gentleman who said he had sent out fifty or so resumes, had three interviews, and one offer. The offer came after three or four interviews, one of which involved a panel of the board members. He turned down the offer, though, because it was a family-owned company and he felt he the market was limited. These are legitimate reasons to not be interested in a job but that wasn't what screeched on my teeth. What bothered me was that he didn't decide after the first interview not to proceed further. He knew at that point the company was family-owned and he had a good idea of the market the company was in. Why wait until the very end and waste all that time?
First interviews are essentially a time when both parties can circle around each other and get the feel for the situation. Does the employer feel the candidate is viable? Does the candidate like what he sees in the company? Successful job searches have lots of first interviews. You want to be out there on several first interviews every week. You should be bowing out after some of them, too. Not every company will feel right, have the things you are seeking, or be a good fit. If you are not withdrawing from consideration after some first interviews, you don't have a good idea of the type of company or position you are seeking or you are feeling desperate.
Is it a bad thing to withdraw after a second interview? No, but to get all the way to the end and then bow out because of something you learned on the first interview is discourteous and inconsiderate. You waste the time of the employer. You waste your own time - time that could be used plowing new ground with other companies.
Many say they don't get a lot of first interviews. If you aren't getting first interviews, you have a resume/cover letter problem. It's the job of the resume and cover letter to win the interviews. If you are getting a lot of first interviews but few second interviews, you probably have an interviewing problem. Interviewing is something most people only do once or twice every few years and they just aren't very good at it. Interview coaching can help that and so can going on a lot of first interviews (practice). That circles us back to the job of the resume to garner lots and lots of first interviews.
If you are getting through the first two rounds and being eliminated after the third round, there may be something lacking in your education, experience, or possibly a problem with your references that may be causing a glitch in your job search. At that point, some investigation needs to be done to find the cause of the problem. If you are getting all the way to the offer and then turning it down due to something you knew after the first interview, you may have a fear problem - fear of getting hired. That we can't help with.