Mechanical energy can be lost when non-conservative forces act (like friction), but the energy merely gets transformed into other kinds of energy.

The Law of the Conservation of Energy

Energy can neither be created nor destroyed, just transformed from one kind to another.

Mechanical energy that is lost or gained generally comes from work done by non-conservative forces. Call this W_nc:

DU + DK = W_nc

U_i + K_i + W_nc = U_f + K_f

A law is far more fundamental than a principle. Laws apply all the time. Principles have fine print.

If you slide a book across a table, it comes to rest. What happened to the kinetic energy?

Friction is very good at turning kinetic energy into thermal energy.