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From the Las Vegas Advisor Question of the Day:

Q: What factor(s) caused a decrease in the number of entrants in this year WSOP Main Event?

A: The World Series of Poker (WSOP) drew less than 6,500 participants in 2007, down nearly 30% from the nearly 9,000 players in 2006, and the reasons for the drop in attendance have been the cause of a fair amount of speculation ever since.
The one reason that everyone seems to agree on is the impact of the dreaded UIGEA, the Unlawful Internet Gambling Enforcement Act, passed in October 2006.

The explosion of online poker fueled the skyrocketing numbers of participants in the WSOP. The seminal moment, we believe, was when Chris Moneymaker won the 2003 main event, after earning his $10,000 buy-in by winning a $39 online satellite tournament at Pokerstars.com.

Internet poker rooms sponsored more than half of the record total of players in the 2006 WSOP, before the passage the UIGEA. (Though no official percentage has ever been confirmed, the estimate hovers around 55%.) But in 2007, Harrah's was prevented by the UIGEA from directly acknowledging WSOP qualifiers from online poker sites. Thus, the poker sites couldn't directly register their satellite winners for the tournament.
Instead, the winners were given the equivalent of the entry fee (and, in some cases, a little extra for travel expenses) in cash, deposited into their online accounts. The winners were then supposed to use the money to get to Las Vegas and register themselves for the WSOP main event. Given the choice to take the money and play or run, many of them ran, never bothering to show up for the WSOP.

It's estimated by industry experts that upwards of 4,000 such ignored the WSOP due to the new arrangement. Without the online ban, it's conceivable that the field at the main event would have surpassed 10,000 players.

Still, the WSOP drew a record number of total participants, at nearly 55,000. They created a cash pool of a record $159 million. A record was set for a non-main event on June 30, when more than 3,150 players bought in to the $1,500 hold 'em tournament. So we don’t think the WSOP is in danger of going away for lack of interest.