In the analog world, the higher of the 2 input voltages will be passed to the output, and the lower one will be ignored. What is the reason for this.

 

...because of how diodes work... They allow current to flow in one direction, so the higher voltage will reverse bias the diode on the lower voltage supply, meaning very little current will flow through it.

See the article on diodes in the eBook

 

Two words: reverse bias.

Take your schematic and write in all the voltage drops with polarity. You should see the "lower one" is reversed biased and not conducting.