I docent and lead tours at 2 different museums. So here's an inside look at this question:
First, the answer is yes. Very little of whatever gets donated to museums
ever gets put out on display. At first glance, this seems rude of the museum perhaps, or a waste of a good item, etc.... Perhaps you're thinking "sheesk, why did I even donate it then? I could've put it on ebay and fetched a high collectible's price!" blah blah blah. These are all reasonable conclusions, it would seem, to the md'r who donates an item. I mean, afterall, isn't that the mantra we hear
AGAINST our hobby sometimes? - That historic stuff, relics, etc... gets put on our
own mantle place, and the public can't learn from it? Afterall, perhaps it was found on public land, so it should be "in a public museum" therefore, for all to enjoy, etc...
I've now been on both sides of the coin, as an md'r who donated things (with the above notions in mind), and now, for several years, as a museum docent. So here's the skinny:
1) Museums simply get more stuff than they can put out on display. Plain and simple. There is only so much floor space, so they put out what they can. To simply say: "why don't they rotate the displays often enough that everything gets seen over time?" The reason is, that ..... museum's don't usually get the same visitors. So if a museum went to great lengths to portray whatever theme it they exist for, they would consider it appropriately done, for the visitors, since odds are, the visitors are persons who, each time, haven't been there before. But a bigger reason why rotations aren't just the easy solution is:
2) Museums face budget and volunteer archivist shortages all the time. To rotate out displays properly (not just each thing "thrown" into a display cabinet the minute it's donated) takes docent time and budget time. I mean, seriously: how many of you have volunteered your time to work in city museums

And to do things right, every paper, every document, every relic, etc... must be recorded, documented, catologued, properly stored (as per whatever preservation measures it needs), etc..... Ie.: they don't just "throw things in a room" (at least not without the
ultimate intention of catologing and storing when the time and docents are available). One museum I worked at was years behind in this process. We were opening boxes of paperwork from years earlier, for instance. We painstakingly id what each item was, etc.... Afterall, presumably researchers would want a way to determine where, in the archives, info on such & such is, and would therefore need it alphabetized, foldered by type, etc.... All this takes time, and is usually done on a volunteer basis. To do any less, and I guarantee you, someone would be crying foul that things were lost, things are dis-organized, things are damaged, etc....
3) Some of you think you can attach mandates on donations. Let's look at the first "mandate" you recommend: "Must be displayed". Sounds reasonable, right? But stop and think: If museums allowed this mandate, they would basically be letting the public dictate what gets put on display. While your item *might*, in
your mind, be perfectly fitting to the museum's theme, you are basically taking away the curator's say-so & decision-making. And even if he drools over one donation that he may perfectly want to display, he walks a tight-rope of political correctness. Because if he says "yes I agree" to you, how does he explain to the
next person that "no I don't agree"? He is basically saying the second person "your item isn't worthy, we don't like it" etc... Which leads us to the next point:
4) Some of you may ask "why not just
decline items that museums know full well they'll never display?" Because you'd be surprised how many people are offended, and make a big stink. Eg.: "
What?? you mean my great grandmother gertrude's sewing machine ISN'T pertinent to the city's history?? I know full-well she stiched up soldier's uniforms with this! I'm complaining to the board of directors!" So to avoid insulting anyone, and to avoid appearing un-gracious, museums tend to accept whatever's donated.
5) Some of you have suggested adding the mandate "On Loan". In the old days, museums accepted these terms I suppose. But more and more, you will find museums not accepting these terms anymore. Reason? Because otherwise you get odd situations where someone comes in, years later perhaps, demanding that display cabinets be opened - right then and there, so they can get something back. Or worse yet, their item is in storage, and ...... what if the item can't be found? What if it was damaged in a fire, or stolen during a breakin, etc... All of the sudden the museum is legally bound, and gets in to a legal tussle. Believe it or not, museums have had people barge in, even for things that were DONATED (with no such mandates) and people saying "
My sister-in-law had no business donating that sewing machine, so give it back now, lest you hear from our lawyer". For all these reasons, museums are increasingly having persons sign that anything they donate becomes the full and complete property of the museum.
Hope this clears some misconceptions, that museums are not as mean, cruel, and calloused as some might think.