An explosion occurred in Fukushima Unit 1, which experts have attributed to hydrogen accumulation in the reactor building. Note that this is outside of the primary containment, as shown here (image courtesy of NEI).
Essentially, what was destroyed was a containment designed simply for the protection of equipment from the elements - i.e., what appears to be a thin metal structure which covers the crane and other equipment used to reload the core. The infrastructure surrounding the core (the undamaged portion) is made of thick concrete, and as one sees, it is generally undamaged.
Cooling the reactor
The biggest challenge right now for Unit 1 has been to keep the fuel cool as it quickly loses its decay heat; immediately upon shutdown, the core still is around 6-7% of full power, and decays exponentially from this point. Without cooling pumps, what has happened was that water began to boil away. This creates two issues - first, that the steam being produced builds up pressure (having nowhere to go), and second that as the water boils, there is a threat of the fuel rods becoming "uncovered." The result is that the heat cannot be efficiently removed from inside of the fuel rods as they are exposed, thus causing them to heat up.
In order to prevent this, the reactor building was flooded with seawater containing boron. Boron is used to "soak up" any excess neutrons in the core, preventing any chance of the reactor restarting as coolant (which also serves as the neutron moderator which allows for the chain reaction to occur) is restored. While the control rods which were dropped into place as soon as the earthquake started have "shut down" the fission chain reaction, boron is an extra safety precaution.
What this means is that Unit 1 is likely a total loss - this reactor will likely never operate again. Flooding the reactor with seawater is a standard protocol, but also a last resort in order to prevent the fuel from overheating. Normally, reactors use ultra-pure water in order to both prevent anything being introduced which could result in corrosion inside the reactor system, as well as produce anything "extra" which can be "activated" by neutrons (i.e., resulting in contamination). Seawater is far from "pure" from this standpoint, and as a result this reactor will likely be permanently shutdown. However, this reactor was an older vintage - built a little over 40 years ago (1967, began operations in 1971) - and thus will likely be written off as at the end of its useful life.
Update: Reader David points out that Unit 1 was very near the end of its licensed operating life (March 26), with no indications toward a license renewal, and little indication of interest, given the low power of Unit 1. Thus, while seawater injection was a last resort, this is likely only to cost TEPCO a couple weeks of lost generation, with the plant already looking slated for retirement. (One might make a reference to a cop drama cliché here.)
Possible consequences in Unit 1
Breaking reports have indicated a potential radiological release from Unit 1; however, these levels have generally been low, with a maximum reported dose around 128 millirem per hour. This is actually a very small amount of radiation - elevated above background, but generally lower than many common medical procedures such as CT scans.
However, the presence of radioactive species of iodine and cesium in the outside environment may have indicated a possible failure in the fuel cladding itself, allowing the release of some radioactive fission products with the steam which was vented itself. This may have occurred due to the fuel becoming "uncovered" as technicians attempted to restore coolant.
To clarify what this means, it is helpful to go back to the "defense in depth" systems engineered to contain radioactivity in fuel. It does not appear likely that the fuel itself has failed (e.g., fuel melt), however the production of hydrogen from boiling coolant may indicate a very high temperature in the zirconium cladding used to contain the fuel pellets. Were this cladding to rupture, it would result in the release of a small amount of radioactive fission products, such as noble gasses (Krypton and Xenon) as well as iodine and cesium.
Noble gases are of very little concern, as they are chemically inert - thus, they do not interact with anything in the environment and simply float away. Iodine is of a concern due to the ready uptake of iodine into the thyroid, however preventative measures such as potassium-iodine tablets can have an "inoculation" effect by flooding the thyroid with iodine, blocking the later absorption of the radioactive iodine released.
Again it should be emphasized here though that any release would be extremely small given these levels - most of the radioactivity would still be in the fuel pellets themselves, which show no indications of failing. Further, the maximum levels encountered are far from dangerous - while elevated, these levels are still well below the exposures one would receive from natural sources (including high-altitude flights) over the course of a year.
Unit 1 appears to have been the "worst case" scenario thus so far; it does not appear likely that a similar uncovering or any fuel or cladding damage occurred in Unit 3. This will be the topic of the next follow-up post.