The water infiltrates into the ground recharging the local groundwater, because the water table is below the bottom of the stream channel.
This is the opposite of a more common gaining stream (or effluent stream) which increases in water volume farther downstream as it gains water from the local aquifer.
[1] Losing streams are common in arid areas due to the climate which results in huge amounts of water evaporating from the river generally towards the mouth.
[2] Losing streams are also common in regions of karst topography where the streamwater may be completely captured by a cavern system, becoming a subterranean river.
There are many natural examples of subterranean rivers including: