I would first be more concerned about the fish losing an eye. The swelling is caused by a fluid build up behind or within the eye. If enough fluid gets in, the eye will literally pop out of the orbit. Hence, why it has been named popeye. I'm not sure about the mortality rate, but what can happen if it is not treated, is that the bacteria can spread and become systemic (within the fishes body) where the bacteria can invade and damage vital organs, usually resulting in death.
As for your question about contagiousness. Well, not really. Fish kept in proper well maintained conditions can usually ward off most diseases, as most bacteria that reside in our tanks are opportunistic, they attack fish that are unhealthy and immunosurpressed or injured. So, the bottom line here is, if your aquarium conditions are of poor quality, all your fish are at risk and you are likely to see other fish develop the same condition or any number of other ones.
Hope that helps
Start by testing all the regulars (ammonia, nitrite, nitrate, pH) and make sure the levels are okay. Check your organic load. Do a good deep gravel clean (probably do about 25% of your gravel a day, make sure you are not exceeding 15% of your water while doing this) and after this make sure to do 10-15% water changes daily for the next little while (1-2 weeks until things are back to normal). Treat with antibiotics, usually 5-10 days, follow the package instructions.