In this context, the sentence is referring to "competition loss/to be defeated" instead of "being lost in certain location". Though the meaning is "to lose", it is different from "to be lost", which is 迷路.

Since it's the single sentence, there are more than a possible case that can occur. Of course, the characters used in certain sentences vary.

No. My friend lost the match or game. I think "diu" means lost in the sense you mean.