Salvation outside the Catholic Church?

I heard someone say that Catholics believe that: outside the Catholic Church there is no salvation; hence all Protestants are going to hell. What is the truth?

The Catechism of the Catholic Church addresses this issue in paragraphs 846-7:
How are we to understand this affirmation, often repeated by the Church Fathers? Re-formulated positively, it means that all salvation comes from Christ the Head through the Church which is his Body:

Basing itself on Scripture and Tradition, the Council teaches that the Church, a pilgrim now on earth, is necessary for salvation: the one Christ is the mediator and the way of salvation; he is present to us in his body which is the Church. He himself explicitly asserted the necessity of faith and Baptism, and thereby affirmed at the same time the necessity of the Church which men enter through Baptism as through a door. Hence they could not be saved who, knowing that the Catholic Church was founded as necessary by God through Christ, would refuse either to enter it or to remain in it.

This affirmation is not aimed at those who, through no fault of their own, do not know Christ and his Church:
Those who, through no fault of their own, do not know the Gospel of Christ or his Church, but who nevertheless seek God with a sincere heart, and, moved by grace, try in their actions to do his will as they know it through the dictates of their conscience – those too may achieve eternal salvation.

The above statements in the Catechism make it clear that the Church does not imply or state that all non-Catholics will go to hell. It is the hope of the Church that ALL peoples go to heaven, even though scriptures are clear that some may not. At the mass we pray for all peoples of the world, especially for those whose faith is known to God alone.