I've recently did a paper on the effects of dams to both the local community and ecosystem. Most of the things I've found are either beneficial or detrimental to the local community and detrimental to the ecosystem.
The Dam structure and its benefits to human community and surrounding environment are many like irrigation, water storage, prevention of water starvation,etc...
and you should see the short term and also long term effects to the entire environmental ecosystem rather subject to local community.
Examples - 1) downstream water withdrawals take all flow from a formerly perennial stream or river, resulting in many forms of aquatic life are lost. Headwater dams may store and release water if carefully managed so stream is returned to perennial, and dependent resources may eventually return.
2). Small dikes and dams were used in early coastal America for limiting storm and high tides from riparian rice plantations to limit extent of salt water influence and during especially high tides or storms, flush stored freshwaters to keep salt wedge back from damaging crop and as well as freshwater aquatic species.
With integrated resource concerns and understanding, mutually beneficial projects are possible, but would need careful design, location and analysis. This level of analysis and required attention and concern for both is not generally an objective.
I would like to add that ecosystems are complex, benefit some elements and you will most likely affect others. Considering reference or natural conditions is sometimes useful.
I think that dams have been built for the purpose of hydro-electricity, irrigation and recreation. However, there are more cons than pros for dam construction worldwide, including but not limited to destroying fish habitats, reduction in water supply in down-streams and impact on sediment delivery.
This is a really large document on design of small dams. It may include some information interesting to your questions. I agree that there can be many potential negative effects and hidden costs that are sometimes not considered, such as the cost of maintenance and even failure.
Don't like dams. But, they can mimic lentic and wetland situations - important when these are scarce or artificially scarce due to human draining etc. So dams can inadvertently help mitigate and even mimic naturally "should-have-occurred" systems. In Greece, the coast of Turkey, their islands, and on dry states such as Cyprus, I have seen 100 dams - about 20 are acceptable or of "real" interest for biodiversity. Most of the 80 or so do have lots and lots of problems- impacts that kill rivers etc... But all this is off the top of my head. In exceptionally human-modified lands such as the Med islands and dry coasts- this question calls for scientific attention.
If the dam is constructed (design) and monitored or regulated properly considering both the ecological and biological impacts would result in a mutual benefit between the local community and and the ecosystem. water source comes from water catchment area and if the forested area in water catchment area are protected from disturbance by the community it will minimize the impact on the ecosystem. however, it is the nature of the dam to be built that determine its benefits.
It is good to see that the answers are split into FOR & AGAINST the construction of dams. This is a very good question and on this topic lot of debates are going on. One thing is clear that "If you want to gain something, you have lose something". Hence one can not conclude that all good things only happens due to dam construction. I am listing the consequences of a dam; as there are plenty in terms of positives & negatives; starting from hydrological to ecological to sociological impacts. Dr. Williams has very nicely explained about large & small dams; alternative resources; operation of reservoir releases; and in-short integrated analysis + implementation + operation of the schemes. That's why now a days EIA studies are mandatory before the constructing dams.