The hydraulic portion is very simple, you push down on the pedal, it moves the master cylinder piston a set amount, that moves that set amount of fluid down the line to the slave cylinder that moves a fixed length rod that disengages the clutch. If some of the fluid gets lost in the process the fixed length rod will not move as far. So if the slave cylinder is leaking it can only leak out and the fluid level will drop but if the master cylinder is leaking it can leak internally, (bypassing). If it's bypassing the fluid level will not decrease but the amount of travel will depend on the rate of bypass. You can take it apart and change the internal seals but because of internal corrosion and wear I would suggest a new clutch master cylinder as they are inexpensive and easy to replace.
I should add that it is possible for the clutch lining to have come apart but the master cylinder is a lot more likely and worth trying first.
1971 series 2a 88, series 3 trans, Fairey OD, owned since 1978.