I'm reading a book right now on why Catholics, particularly young ones, are leaving the Church. It gives several reasons derived from surveys, all of them valid. I'm in a hurry this morning, so I don't have time to give you the list; I'm sure you can guess most of them.
I agree with it at the micro level, but not at the macro level.
At the macro level, what has happened is that we no longer believe in the Truth. That is, there is no one Truth for people to find about life, morality, salvation*, God* and the other over-arching questions in life. Catholicism is all about defining the Truth through logic, experience and prayer. If there is no Truth, there's no point looking for it and no point in an institution that purports to offer it.
The Church is like a store that says it sells unicorns. Since unicorns don't exist**, there's no point frequenting the establishment. It's not that God is like a unicorn, it's that Truth is like a unicorn. Most of the people leaving the Church aren't becoming atheists, they're just bailing out on the institution.
More ponderings on this later.
* - Assuming, of course, that God and salvation exist.
** - Update: In the comments, Foxie points out the flaw in my unicorn analogy. The Truth really does exist, it's just that we don't think it does. The store really does sell unicorns, but the customers refuse to see them and therefor don't come in to shop. It's still a lousy analogy, but at least now it's a bit better. Thanks, Foxfier.