http://en.wikipedia.org/wiki/Entropy
.... systems tend to progress in the direction of increasing entropy.[6][7] For isolated systems, entropy never decreases.[5] This fact has several important consequences in science: first, it prohibits "perpetual motion" machines; and second, it implies the arrow of entropy has the same directionality as the arrow of time. Increases in entropy correspond to irreversible changes in a system, because some energy is expended as waste heat, limiting the amount of work a system can do.
So in isolated systems energy is lost as heat, and entropy increases. Entropy of an isolated system never lowers its entropy.