Some ideas:
More sports options- I know at my high school, when I was there (2000 graduate) there was no s****r program, and now there is s****r, which is a spring sport. At other schools lacrosse has started to become popular, which I believe is also a spring sport.
Specialization- as there is more and more pressure for kids to focus on a single sport, whatever other sports they would have played start to be phased out. So now the guy who was primarily a football guy but also played baseball in the spring is now a football only guy. I know some (many?) schools run spring 7 on 7 football stuff, and I think in some places there is even full blown spring football (but I'm not sure about that). Of course, other sports are factors as well, but this just the example most familiar to me.
Other options in general- this could be any number of things, but kids just have more options for ways to spend their free time- from skateboard parks to MMA to Wii to cable TV, internet, jobs, etc
Of course there could also be factors specific to that school/area which are driving the numbers down. If there has been a coaching change or a general decline in the program, or if the feeder programs have declined in popularity, then I think you could expect some decline in the numbers and quality of players at the high school level.
One thing I will note, where I coach (AAA school in Richmond) I was shocked to see the numbers that came out for tryouts last season. Only 35 kids tried out. I went to high school at a single A school where 50-60 kids would show up for tryouts. But I was chatting with a local dad through the HSBBW and one thing he mentioned that I hadn't thought of...with the expanded influence of travel programs, by the time kids get to high school they know whether or not they are a player for the most part.
At that point, they've played through LL, they've probably played some sort of travel ball since at least 11U (if not younger), they've moved up to the bigger field, and they have sort of realized whether or not they have a future in baseball. If they know they've been on lower level travel teams, or they weren't all-stars or whatever, then they figure why waste my time sitting the bench or not making the high school team...let me find something else to do with my time.
To me, that's not necessarily a bad thing. Sure, there are some kids who are late bloomers and may count themselves out of baseball too soon, but if they are getting to a point where they're not enjoying the game, then they should move on to something else. This gives them a chance to find their passion where they can excel, and it gives them something to enjoy throughout their four years of high school.