more people are playing online, as it's easier and more convenient (and you can play when work is slow :-P ).
seriously though, the online resources are so good these days, with free video's, free databases, strong online communities, plenty of people to play against of all sorts of differing abilities, and games going at all hours of the day, with different varaiants and time controls. i like playing over the board, but it's hard to find the time to get out of the house for a couple of contiguous hours with 3 small kids, so i play online.
i think chess is going strong, just changing mediums :-)
and who says chess is uncool? both my three year old and my four year old love it (and i'm sure my 8 month old will as soon as he can grasp the basics without teething on the pieces)
The problem with chess being "uncool" is all a matter of advertising & promotion. If celebrities were to promote the game it would become "cool". The game doesn't have the Michael Jordans or Tiger Woods to make the game glamorous. There are many celebrities who enjoy the game like everyone else. These people are the ones who need to promote chess tournaments for kids, to get them enthusiastic about the game. Advertising is everything. You can have the blandest of products, but if you have commercials and ads showing it as cool, hip, sexy, etc. the product sells. Chess needs to promote itself better if they want really massive interest in the game. you promote the game, the tournaments get more attention, & if it grows extremely popular, then the Sonys, Pepsis, Macdonalds, etc will want to sponsor tournaments just like anything else.