Lack of proper hydration can have serious effects on performance, even at levels as low as 2% loss of body water.  The ensuing impairment results from the body's inability to adequately regulate it's heat.  This gives rise to increased heart rate and body temperature which results in fatigue, impaired mental function including motor control, decision making and concentration.  Stomach discomfort also results due to slowed gastric emptying.

The good news is that these issues can be prevented by regular fluid replacement.  To get the whole story, see the article "Fluid - Who Needs it?" by the Australian Institute of Sport.