What happens if siblings have children?

Answer: That's called Incest, and Incest can cause a lot of health issues for the baby. For instance, it could cause them to have Down syndrome, or just a lot of birth defects, why, I'm not sure yet, but its not recommended, and is frowned upon.

Answer: There is a higher likelyhood of health problems. This is due to the child inheriting two recessive genes - from father and mother. If the parents are siblings (or, in general, close relatives), then it is more likely that they have the same harmful genes. If the child inherits the harmful gene from only one parent, the disease won't appear, if it is recessive (which is commonly the case for inheritable diseases).