It shouldn't loose water, except maybe a little through evaporation. Are you sure you've got it connected up correctly? The tube from your CO2 source should be under the water, and the outlet tube that goes to your tank/diffuser should be way above the water. The idea being you see the CO2 come out of the source as a bubble, it goes into the empty space above the water and the pressure pushes the gas into the outlet tube. It sounds like the pressure might be pushing the water through the outlet.
Either that, or its going up the inlet tube which would mean you've not got a lot of pressure built up for some reason (bad yeast mix?) Have you got a one way/check valve between your CO2 source and the bubble counter?
Edit: Theres a nice pic on this thread that explains how it should be setup