When and how did English lose the 2nd person singular?

There was a transition period during which both were used. The 2nd plural was used when speaking up to someone, i.e., a peasant to a lord. The 2nd singular was used when speaking down or with people with whom one was intimate. A careful reading of Shakespeare plays will show that this is pretty much the way he depicted people speaking.

It is my guess that this was rooted in the desire to aggrandize the upper levels of society. The point at which you switched from 2nd singular to 2nd plural gradually rolled downhill until everyone became the recipient of the 2nd plural.