Let me quote Bruce Schneier here, as I couldn't possibly express it any clearer:
SHA-1 has been broken. Not a reduced-round version. Not a simplified version. The real thing.
Apparently the research team of Xiaoyun Wang, Yiqun Lisa Yin, and Hongbo Yu (mostly from Shandong University in China) have written a paper (which is not yet generally available) with more details on the attack.
If this really holds, this will surely have severe implications on the security and encryption world. Seems like we're slowly running out of hash functions, as MD5 unfortunately has its own problems, too.