There are quotes from conversations about this on the IRC channel that can be found here.
Basically spirit loss is based on your actual fame. The fame you have got from the actions you have taken. It does not matter if other people do not know about those actions, for example they do not know you were the assassin that killed the king, or if you are trying to hide on a different identity.
It is all about risk and reward.
However, do remember getting up those fame rankings as a non-noble might not be that easy. A lot of people are going to be getting involved in the story and to move up the ranking you have to be more famous than the average. If everyone is famous, no one is. So it is only if you are 1.5 times more famous that the average fame, which will likely keep rising, that you move up to a known player. So not too much of a risk for most, but if you do get up there you are opening a lot of doors. You are putting yourself in the line for more work, more income, etc. So it is still that risk and reward balance. Higher penalties, higher rewards.