It sounds like your machine may have some flex or looseness in one or more axis. Can you push or pull on the cutting bit and see any movement? If so, you need to find out where it is 'loose'. It is interesting that your dimensions are off exactly 1/8" each direction. How did you generate the gcode? What size bit did you use?
You didn't say if your cut was a rectangle (one axis longer) or if it was off diagonally. I would start with checking the corners of your cuts to see if they are at 90 degrees. If they aren't, then the Y and X axis are not square to each other. Most of any misalignment can be adjusted out with the bearing tension. Caution, do not overtighten the bearings, you can ruin them easily if you overtighten the adjustment bolts.
Second, I would check to make sure the machine is moving the correct amounts for each axis. There is a stepper setup support routine in Mach3. You tell it which axis you want to test, tell it how far to move. Mach3 moves the axis then asks you how far it moved. Then it automatically resets the steps per unit value to match up your axis. I recommend doing fairly long movements which will show small errors better.
If your cutting depth is increasing, you may be missing steps as it raises the bit, or your bit may be loose in the router. This has happened to me a couple times, when the bit slips, it digs in a little bit each time gradually getting deeper. It never seems to get more shallow.