What happens with lost bitcoins? (Score 1)

I've not seen the answer to this question anywhere that i'm aware of. - What happens with bitcoins that are lost? IIRC there can only be a maximum of 21 million bitcoins in existance total. Supposing i hoard a million bitcoins on a flash drive and then that gets toasted in a fire and i have no backups. Does the 'system' have a way of knowing that the population of bitcoins has been depleted? (i doubt it). Does that then mean that there can only be a total of 20 milion bitcoins? Will the currency eventually DoS itself out of existance through these losses?