@RTD1
That sounds a lot more like an equipment failure than someone deliberately turning off the transponder.
Or that it was at the limits of reception of its output power of 200watts (wow, didn't know that)
Useful information for anyone with transponder or SSR questions (pre mode s)
Transponder Basics - AVweb Features Article
Edit; End piece from the above 1998 article;
The FAA is now talking about a future ATC system based not on radar surveillance, as is used today, but on "automatic dependent surveillance" in which aircraft continually transmit their GPS position to ground stations which keep track of them and tell controllers where they are. In view of this, it's possible that Mode S may become obsolete before we need to worry about it.
Possibly (as others here have suggested) a standalone version of the above will be mandated as a result of MH370