What causes this?
Hardness of water means how much there is earth-alkaline metal ions, usually Ca2+ ja Mg2+, in water (sometimes Ba, Sr, Fe, Cu, Al, Zn... too).
What effect does it have on the fish?
It affects fishs physiology, "osmothic pressure" <- Get some books of biology and fish. If the osmothic pressure is wrong for fishes, it causes lot of stress to fishes. And when they are under stress they become sick usually. So, if you know your tap-water is hard, it is recommended to buy fishes which live in hard water area in nature. So, don't put any soft water fish into hard water tank and other way neither.
And how do I remedy this?
E.g. using ioni-exchanger / RO-units or beeing not to buy soft water fishes.
And like A-Anna said, if your KH is high, you try to use peat-filtration - it effects carbonate hardness.