Is the magnetic field propagated by photons or by virtual photons? If it is by photons, then doesn't that mean that magnets lose energy and eventually become non magnets?
You are right, real photons always travel at the speed of light and would carry energy away from a magnet.
From a field theory point of view, all static fields, whether electric, magnetic, the weak nuclear force or the strong nuclear force can be thought of as being mediated by virtual particles. So for either electric or magnetic fields, that would be virtual photons that mediate the field. See Wikipedia for more information. Another great article explaining virtual particles is from John Baez and finally see this question and answer: What's the relation between virtual photons and electromagnetic potentials? .