"November 2nd. 3:00 PM in the afternoon.
~The date and time of Mutantkind's Decimation
After altering reality so mutants were the dominant race, the Scarlet Witch then changed reality again, this time attempting to rid the world of the mutant gene. 91.4% of the world's mutant population lost their powers overnight. The Xavier Institute became a haven for those who still had their mutant powers, many of them attempting to escape persecution. Against the wishes of Institute professors Emma Frost and Scott Summers, the government assigned Sentinel Squad O*N*E to protect the mansion and its inhabitants.
The Sapien League took advantage of the situation by attacking the mansion and any mutants attempting to reach it.
Mutants at the Institute rallied around the number "198", an early government estimate of how many powered mutants were left in the entire world.
Reporter Sally Floyd interviewed a number of de-powered mutants for her Mutant Diaries report. However, a serial killer calling himself the Ghoul murdered several of those whom she interviewed, leaving "Not enough died" as a marker. The Ghoul was eventually killed in an explosion during an attempt to capture him by the X-Men. Given the nature of his teleportation powers, it's possible that the Ghoul survived.
The energy previously possessed by the mutants was orbiting Earth after the events of M-Day. While passing some orbiting rocks, the energy awakened Vulcan (Gabriel Summers). Eventually leaving orbit and entering atmosphere, the energy was absorbed by the Collective.
X-Factor has to face both with Rictor's powers loss, and the first step of Mutant Town end, shattered between sad or happy depowered mutants and anti-mutants activists.
Reversing the Effect
While the M-Day effect was initially thought to be irreversible, the following methods proved more or less effective in restoring mutant powers:
Using the Terrigen Mists of the Inhumans, Quicksilver was able to not only restore his own powers and those of others, but bring them back at an enhanced level. The side effect of this however, was that the powers often spun out of control and resulted in the death of the mutant. To date, the only "mutant" successfully permanently re-powered by this method is Luna Maximoff, who had initially her genetic markers mutant and inhuman cancelling each other. Pietro himself lost his terrigenesis-powers after he lost the Terrigen Crystals, but his powers permanently returned to their normal level thanks to unknown means.
In concordance with the High Evolutionary, Magneto was able to construct a machine to restore his powers, using the Dreaming Celestial and the product of what they called "a Celestial lobotomy". The machine however, was not only nearly impossible to construct but extremely dangerous. The process worked, and Magneto regained his mutant powers at the cost of the machine itself.
Apocalypse managed to restore the powers of Polaris (depowered by M-Day) after turning her into a Horseman. It was believed that Apocalypse simply gave her powers similar to her old ones through other means, but he seemingly managed to re-activate Polaris's X-Gene.
After one of Legion's rogue personas, dubbing itself Moira, altered reality to create a world of constant war and struggle where he was a hero, some aspects of this reality bled through into the real world after Legion restored it. One of these aspects were the powers of Chamber. In this reality created by Legion, Chamber once again had his mutant powers in their old state, and upon returning reality to it's original form, Chamber kept his restored powers.
Wanda Maximoff was able to reverse the M-Day effect on one mutant, Richtor. After losing the source of her enhanced powers, the Life Force, however, Wanda was unable to reverse it for anyone else.
The return of mutant messiah Hope Summers to the present triggered the first activated mutations since her own and M-Day. It is believed that this, along with Hope's unique ability to stabilise these mutants, were an extension of her relationship with the Phoenix Force.
The Phoenix Force travelled to Earth to claim Hope Summers as its host in order to reverse the Scarlet Witch's curse. It did so successfully, after Hope used its powers to re-ignite mutations across the world.
Immediately after the "Phoenix No More" incanted by The Phoenix Messiah and the Scarlet Witch, the mutant race was restored. Although publicly known mutants regained their powers, about the same number of mutants as before M-Day popped up in the world. These list contains a few (mostly the first encountered by various teams of X-Men and their enemies).
It is possible that Jean Grey kept X-Gene in her DNA. Beast and Dark Beast have found none X-Gene in dead bodies of mutants in Genosha, so some dead mutants lost their powers. However, some have kept them, as seen in the Necrosha.