WEP stands for Wired Equivalent Privacy, it is a encryption algorithm to encrypt data over radio waves and was designed to secure data when they are transmitted in a wireless LAN (802.11 networks). WEP is defined as part of the 802.11 standard.
What happens when WEP is disabled ?
In absence of WEP or other powerful encryption mechanism the data transmitted in the wireless LAN (between the Access point and the mobile clients) will not be encrypted. Any intruder will be able to capture the unencrypted packets and reassemble them to produce the original message. Remember the Access points are connected to the wired network, any successful intrusion on the wireless side can put the entire network at risk.
What can the wireless LAN Administrator do ?
WEP though flawed can serve as a basic security mechanism. So, WLAN administrators can enable WEP, when other powerful encryption mechanisms are not used.
In case of public networks where WEP or other similar encryption mechanism is not enabled it is better to turn off this alert.
In public networks if Cisco Aironet Access points are used, administrators can turn on the PSPF (Publicly Secure Packet Forwarding) which will give some security to the network users as this option when enabled will block wireless clients from establishing a ad-hoc network among themselves.