Pretty simple… a decrease in the value of your capital invested. For example, you buy a house for $400,000, and 2 years later is is valued at $350,000. You have made a $50,000 (or 12.5%) capital loss.
Capital losses ignore all income (such as rent or dividends), and expenses that relate to that income (such as repairs & maintenance). These items are accounted for yearly in tax returns. Capital losses are not accounted for until they are ‘crystalised’ when an asset is sold at a loss. Until such time as an asset is sold, its decrease in value may be referred to as ‘paper loss’.