This gives one an idea of the impact space debris is having right now: an average of three maneuvers per spacecraft per year to avoid collision. As space debris is expected to increase, the costs associated with dealing with space debris will undoubtedly rise. We can also expect the destruction of more operational satellites, which has happened twice so far.
The most dangerous space debris is the thousands of large pieces, mostly Russian upper stages, in polar orbits. When these have collisions, tens of thousands of pieces of debris are created. Indeed, we may be currently in a very slow motion chain reaction of collisions creating debris that in turn creates collisions which create debris ... The debris is moving at very high speeds, so even a small piece can destroy a satellite. The film 'Gravity,' while not particularly accurate technically, highlighted this quite effectively.
What to do: the single easiest and most effective act would be to get rid of the large pieces. It's been estimated that removing 10 per year would be sufficient, statistically, to start reducing the total amount of debris in LEO assuming other activities don't add much. We should get started on serious debris reduction. Otherwise, given enough time we could easily pollute Earth orbits with enough debris to end the space age.