johnd said you need an explanation from an electrical engineer. It happens that I am one (BSEE 1962) as well as having a MS in Computer Science, so let me take a crack at it. Fair warning: it's technical, and requires a bit of background that won't fit in this forum.
There will definitely be some noticeable USB power drop off, the longer the cable.
Your observation is correct, although it's not really power dropoff. It's an issue of "transmission line propagation".
Here's some info quoted from usb.org -
NOTE: I advise everybody to go on the the next reply now!<quoting>
Cables and Long-Haul Solutions
1. Why are there cable length limits, and what are they?
A: The cable length was limited by a cable delay spec of 26ns to allow for reflections to settle at the transmitter before the next bit was sent. Since USB uses source termination and voltage-mode drivers, this has to be the case, otherwise reflections can pile up and blow the driver. This does not mean the line voltage has fully settled by the end of the bit; with worst-case undertermination. However, there's been enough damping by the end of the bit that the reflection amplitude has been reduced to manageable levels. The low speed cable length was limited to 18ns to keep transmission line effects from impacting low speed signals.
2. I want to build a cable longer than 5 meters, why won't this work?
A: Even if you violated the spec, it literally wouldn't get you very far. Assuming worst-case delay times, a full speed device at the bottom of 5 hubs and cables has a timeout margin of 280ps. Reducing this margin to 0ps would only give you an extra 5cm, which is hardly worth the trouble.
3. What about using USB signal repeaters to make a cable longer than 5 meters?
A: Don't bother. The best solution is self-powered hub with a fixed 10m cable that had a one-port bus powered hub in the middle. The maximum range will still have to deal with the timeout, so any out of spec tweaking of the terminations between the two hubs and the timing budget still won't yield more than 5cm of extra distance.
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Try
http://www.usb.org/about/faq/ans5 for somewhat-less-technical details, and
http://www.usb.org/developers/usbfaq#sig2 for the more technical stuff.
We now return you to your regularly-scheduled discussion.