Well, as in everything in the car industry, a simple and straight forward system like the exhaust is much more complicated and important them we give it credit.
The system takes away the harmful and toxic gases from the engine in the front of the car (where we sit…) and discards it safely in the back. But in the process it gets the pollution level down via the catalytic converter (chemical processes that require the right mix of fuel and air and can decrease the pollution ten folds – Catalytic converter on Wikipedia), lowers the noise via the muffler and even helps with your MPG by maintaining a good back pressure for the engine so it will burn the fuel in a more efficient way.
It’s clear now that maintaining the system and keeping it hole and cracks free (perhaps the tailpipe could be exempt) is a must in order to keep noise down, pollution legal and most important – us alive. A small hole in the pipes will let the incredibly hot gases blowtorch what ever they come in contact with – other pipes, power lines and the body of the car (getting the gases in the cabin).
The thing about this system is that the constant, drastic temperature changes in it, the fact that it runs under the car where it’s wet and full of flying debris and the moisture drawn through it by a turned off and cooling engine, makes it very susceptible to corrosion which leads to holes. So problems that require fixing are not uncommon in the exhaust.
I hope you see now that a hole in the system is not just an eyesore or like a garden hose having a leak, it’s very much important and should be taken care of. It’s a strange truth, but your life depends on most off the systems that make out a car…and the exhaust is right up there.