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The Wizarding World removes Muggle memories when the Muggles see things they aren't "supposed to". This has kept the Wizarding and Muggle Worlds apart for hundreds of years.
For example, the wizards don't find the Muggle because the Muggle is hidden and the Muggle gets away. The Wizarding World finds out . . . etc. etc.
My question is:
How would the Wizarding World respond if a Muggle's memory wasn't edited?
It would appear that sufficient memory charms are cast to make the general population of Muggles sceptical of the occasional sighting of magic (or a magical beast) that somehow gets missed.
Per Fantastic Beasts and Where to Find Them
If any Muggle is unwise enough to confide in another that he has spotted a Hippogriff winging its way north, he is generally believed to be drunk or a “loony.” Unfair though this may seem on the Muggle in question, it is nevertheless preferable to being burnt at the stake or drowned in the village duckpond.
As to how the Wizarding World would respond, the answer is that the International Confederation of Wizards has regularly fined the British Ministry of Magic for failing to adequately deal with Muggle sightings of magic and magical creatures.
The International Confederation of Wizards has had to fine certain nations repeatedly for contravening Clause 73*. Tibet and Scotland are two of the most persistent offenders
*Each wizarding governing body will be responsible for the concealment, care, and control of all magical beasts, beings, and spirits dwelling within its territory’s borders. Should any such creature cause harm to, or draw the notice of, the Muggle community, that nation’s wizarding governing body will be subject to discipline by the International Confederation of Wizards.
