This question was just covered in an article in the new September 2009 issue of Allure magazine, called "Your Mother was Right", about all the stuff your mom used to nag you about.
According to this article, nail biting makes nails weak and can lead to splitting, peeling, and even infections in the skin around the nail if the skin becomes broken. It can cause damage to the nail bed, which can prevent the nail from growing smoothly.
Not saying all this *will* happen, but it *can* happen.