Putting together what I see here, I think the clear answer is "no, HubPages is not losing popularity."
Our position with Google is maintaining or increasing, in spite of Panda updates, thanks to the dedicated work of the HubPages corporate team. Those who stay with the program can get increasing readership, even if the growth process is slower than we like.
People who come to HubPages for community and sharing of writing have a great place to be.
People who come to HubPages to make money face a huge challenge. Most will find it more difficult than they thought, as I have. Each of us will either adjust or become inactive or depart. Big events like the September Panda update will create a "shakedown" in which uncertain people will leave rapidly. This gives the appearance of shrinking.
But does a garden have less life in the winter? Can a ski equipment business gauge it's success by comparing January to June? No. Cycles are natural in a growth process. The weeding out is unfortunate, but necessary.
I believe HubPages continues to be strong and vital, and the key factor is mentioned by DailyTop10.
Now, I also trust Goody5's reporting of the number of Hubbers. But I disagree with Goody's metaphor. I don't see a battle. I see Google, HubPages, and each of us Hubbers who wants to make a significant income as an online writer working together to provide real value in an increasingly noisy Internet. Also, a 10% drop in the number of Hubbers over 6 months is not a big issue. Many companies go through such cycles and succeed. In fact, all great companies do.
For each individual who wants to make money on HubPages, is the number of other Hubbers a significant factor? I don't think so. Rather, the quality of new hubs is key. So, if there are fewer hubbers, it may be because writing stellar hubs is essential to success now, and that takes a lot of work, and most don't want to do it.
But each of us has our own sub-domain. So our success is not keyed to the number of other hubbers. It is keyed to our own commitment to succeeding in online writing.
For me, that's here on HubPages, though I will also diversify.