Hi sewsweet,
Hans gave you some solid advice. All the major search engines update their ranking algorithms regularly, so you will see your rankings on different keywords fluctuate from time to time. You can also see these changes when new competitors arrive on the scene or if existing competitors start taking an active interest in improving their rankings.
If you are paying for a lot of links, this could be an issue. I would also check your analytics if you have it to see what sites are sending traffic to you. Compare before and after the traffic dropped and see if any sites have recently stopped linking to you. If you lost some good links from trusted sources, that could have effected your ranking and hurt the volume of your traffic too.
Here's a link with a lot of good resources on getting links that might be helpful:
Link Popularity - Search Engine Guide Blog