The first thing to be affected by a dam is the flow of sediment, which is usually picked up along banks and stream beds and carried downstream. Sediment collects behind dams, rather than continuing to flow out with the river, and as a result, the water bed below the dam eventually becomes rocky and scoured clean of sediment. Aquatic plants are unable to thrive, and the nutrients in the sediment that nourish fish and other aquatic life are no longer available, sometimes causing extinction in large numbers.
The most obvious impact that a dam has on fish is that it obstructs migration. For some fish species, such as salmon, which which spawn in rivers and then swim out to sea, this can be devastating. For others, being unable to pass dams means that there is not as much species diversity. Many dams in the latter part of the 20th century were built with fish ladders and other modifications designed to allow the passage of fish, but many fish are unable to use the ladders or die in the machinery of the dam. This has a profound impact on fish populations.
Dams also decrease the rate of migration, exposing sensitive fish species to predators that may lurk in slower flowing water.
Water quality directly behind dams is also affected, because dams tend to collect pollutants along with sediment, which must be released and controlled in some way. When released, concentrated pollutants and sediment rush down below the dam causing all sorts of problems.
In all dams, but especially in the case of deep dams, thermal stratification develops because there is no current to mix the water. As a result, the deeper water is very cold and has poor oxygen circulation, while the surface water is warmer than usual. When colder deep water is released from dams, it can cause serious problems downstream for fish and other aquatic life due to its poor oxygenation and the toxins it may carry.
Dams are pretty nifty, and has been an important part of life for humans for more than 2000 years, with nearly half of he world's rivers having at least one dam in it somewhere. But for all the reservoir and hydroelectric and lock & dam benefits of dams, there is a price that gets paid for diverting that water.