According to geophysicists, the Earth's magnetic field does collapse from time-to-time, actually it happens on average 5 times every million years, and we're statistically overdue for another one. What's interesting is that the Earth’s magnetic field has been weakening for the last 2000 years and this is believed to be what happens in the run up to a pole-shift. What will happen in a couple millennia, when the magnetic field has settled down a bit, is that its strength will recover but it will have flipped; all compasses will reverse, south will become north and vice versa. This phenomenon might give us a treat during the “switchover” period actually: much more Aurora Borealis (and Aurora Australis over Antarctica) This beautiful sight is not common at the moment and can only be seen close to the poles, but it might become a regular occurrence and much further south than before. However we'd have to be careful because the lack of a magnetic field around the Earth will increase the amount of radiation that reaches the planet’s surface. It could be that radiation-related illnesses like cancer might become more common. Also problems with electrical and radio appliances will occur all the time, as they do today only during sunspots.
Here's another possibility that might sound off-the-wall, but is worth considering: Could this hole be man-made? Operation Starfish Prime was an US government scientific project in 1962 when a 1.4 megaton nuclear bomb was detonated in space. The purpose has been documented as an astrophysical experiment/muscle-showing exercise to the Soviets. (The “superpowers” often indulged in these playground games during the Cold War, oblivious to the human and environmental costs. In October 1961, just a few months before Starfish Prime the Russians had detonated their 62 megaton “Emperor Bomb”, an explosion so huge it broke windows in Finland!) Could there have been another motive behind Operation Starfish Prime? It’s interesting that the previous year the president, John F Kennedy, had formally launched the Apollo Programme with these words: “First, I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth. No single space project in this period will be more impressive to mankind or more important in the long-range exploration of space; and none will be so difficult or expensive to accomplish.” However as Kennedy spoke these words scientists at NASA by then were coming to realize that the Earth was surrounded by several zones of dangerous radioactive particles called the Van Allen Belts. The belts’ discoverer Dr James van Allen stated that this radiation could present a hazard to astronauts and that spacecraft would need to be designed accordingly with shielding. How big was the threat? Nobody was sure at the time and even today figures quoted for the height, thickness and intensity of the belts vary. It’s also been discovered that the belts change according to the activity of the sun. Starfish Prime might have been done to try and clear up the uncertainty. In their documentary film What Happened on the Moon and their accompanying book Dark Moon- Apollo and the Whistleblowers David Percy and Mary Bennett claim a covert objective of Operation Starfish Prime was to force a navigable channel through the Van Allen Belts and allow manned rockets to reach the moon. If this was its objective it did worse than fail; it aggravated the original problem by creating a new radiation belt of its own! It was announced recently by President Bush that NASA has plans to send a new manned mission to the moon in the next decade; Russia and China have made the same announcements. Is there a connection between these announcements and the emergence of a hole in the Earth’s magnetic field? If there is then this time it has worked; presumably the government projects involved have found a more effective way to dredge a passage through the radioactive belts than battering them with a nuclear bomb. But what does this mean for us? The linked article says: "This could result in stronger geomagnetic storms than we have seen in many years." With all the problems associated with them in terms of radio interference and the failure of electrical grids. If this hole is man-made then whoever did it is probably aware of that, but history shows that concerns for our welfare have never stopped them in the past.