What is a "cracked" furnace? How serious is this?

The part that transfers heat from the gas flame to the air in the house is called a “heat exchanger”. If the heat exchanger has a crack or rust hole in it, the fumes (especially carbon monoxide) enter the air that comes out of the registers. This is why a “cracked” furnace can be so dangerous. A small crack may not be dangerous yet, but will get bigger and even small amounts of carbon monoxide can be dangerous to some people. Heat exchangers can be replaced, however if they are out of warranty, it is usually not much more to install a new higher efficiency furnace.