This information can be used by potential hackers to pinpoint which version of WordPress you are using, and can help them find an exploit to start hacking your website.
Since version 2.5, it is not that easy to remove that information anymore, except via a trick in your theme’s function.php file or via a WordPress Plugin.
To manually remove it from your blog, open up your Theme Editor, and find the functions.php.
Add the following code to the file:
<?php add_filter( 'the_generator', create_function('$a', "return null;") ); ?>
Or, if you prefer, install a plugin such as Secure WordPress, which Frank also mentions in his comment.
I have also researched alternative solutions, and found a few, such as the bs-wp-noversion (not tested) plugin as well as a plugin by Angsuman Chakraborty, named Angsuman’s WordPress Header Info Remover Plugin (also not tested).
You should be aware, that this tip does not SECURE your WordPress blog, it simply removes some information which can aid people trying to hack your blog.