Although a gas water heater must be vented for several reasons, the most important reason is that it ensures the carbon monoxide produced by the heater can escape the building. The vent also draws air into the heater to help it work more efficiently.
The water heater requires oxygen to help the gas burn, which means that an improperly vented water heater may not burn as efficiently and can result in more gas being used to produce the same amount of heat. However, the biggest problem with a lack of proper ventilation is that it can lead to carbon monoxide building up inside the home.
Carbon monoxide inhalation can cause serious health problems or even death, making it vitally important that the toxic fumes are properly vented away from the building. In fact, the U.S. Environmental Agency notes that more than 400 Americans die each year from carbon monoxide poisoning. The biggest problem with carbon monoxide is that it is colorless and odorless, which means that it is highly likely that people don't notice the gas until they have already been poisoned by it. The only sign that a person has been exposed is the onset of flu-like symptoms, such as nausea or dizziness.