That is a topic better handled by the TiVo FAQ. Go to the TiVo Community Forum at http://www.tivocommunity.com and read the TiVo FAQ. There are lots of helpful people on there and many good threads on there to help you understand what TiVo is.
Well that depends on you. The biggest reason to hack your TiVo is because you want to add more space to it. For example, by adding a 30GB drive to a 14 hour TiVo you can go from 14 hours of storage to 52 hours. Some people want to hack their TiVo just because it is fun and they enjoy the hacking experience.
The biggest reason for this is that TiVo used Linux for their Operating System. Linux is an open source OS that is widely available for many different platforms. The other reason is that TiVo uses standard off the shelf IDE hard drives. This makes the hard drive upgrade easy since you can go to any computer shop and buy an IDE drive
Yes. There are many "bad" things that could happen. The TiVo runs on AC power so you could electrocute yourself if you touch the power supply with the unit plugged in. If you damage the original hard drive in the TiVo you will render your TiVo useless if you have no backup. The other big warning is that when you open your TiVo you void your warranty. Do NOT open your TiVo unless you understand the risks noted above. Life with TiVo is great, but life with a dead TiVo is not!
Well it depends on what you want to do. If you want to simply add a second drive to your TiVo for more storage space, the answer is no. If you want to modify the TiVo Linux kernel the answer is yes. The best way to answer this question is to read the following chapters to see what is required knowledge for the hack you wish to do.