If two people love each other, then fall out (because of an argument or other reason), then there *was* love lost between them.  But if two people *don't care* much for each other, then have a falling out, then there really was *no love lost* between them.

Interestingly, when it was originated in the 1500s, until about 1800, it could indicate either [*extreme love* or *extreme hate.*](http://dictionary.reference.com/browse/no+love+lost) 

*Extreme love* (the image of love shared in a common vessel; when affection was mutual, none of the love in the vessel was lost): 

>- No love between these two was lost, each was to the other kind. - Reliques of Ancient English Poetry , 1765  
- Nor was there any loue between vs lost. But I held in the same in high regard. - Faire Em, (a fraudulent Shakespeare) - 1592

*Extreme ill-will*
>"There's no love lost," quote Sancho, "for she speaks ill of me too when she list." - Don Quixote. 1620 translation 

Today, however, the term signifies **ill will exclusively**.