  We use the ``Via Lactea'' simulation to study the co-evolution of a Milky
Way-size LambdaCDM halo and its subhalo population. While most of the host halo
mass is accreted over the first 6 Gyr in a series of major mergers, the
physical mass distribution [not M_vir(z)] remains practically constant since
z=1. The same is true in a large sample of LambdaCDM galaxy halos. Subhalo mass
loss peaks between the turnaround and virialization epochs of a given mass
shell, and declines afterwards. 97% of the z=1 subhalos have a surviving bound
remnant at the present epoch. The retained mass fraction is larger for
initially lighter subhalos: satellites with maximum circular velocities Vmax=10
km/s at z=1 have today about 40% of their mass back then. At the first
pericenter passage a larger average mass fraction is lost than during each
following orbit. Tides remove mass in substructure from the outside in, leading
to higher concentrations compared to field halos of the same mass. This effect,
combined with the earlier formation epoch of the inner satellites, results in
strongly increasing subhalo concentrations towards the Galactic center. We
present individual evolutionary tracks and present-day properties of the likely
hosts of the dwarf satellites around the Milky Way. The formation histories of
``field halos'' that lie today beyond the Via Lactea host are found to strongly
depend on the density of their environment. This is caused by tidal mass loss
that affects many field halos on eccentric orbits.
