The performance hit is the cost of the additional seek and writes. sync_binlog = 1 basically tells MySQL how many binary log writes to buffer before flushing the log writes to disk. If it's set to 1, then every write is flushed. 0 tells MySQL to let the filesystem handle it. So, if you have a disk failure you may lose some indeterminate number of binary log writes that are part of the last transaction.
Depending on your storage set up (SAN with battery backed cache, direct attached drives, etc.) a setting of 0 may be safe, or it may not. How much data loss can you and your application tolerate?
to quote the MySQL reference:
The default value of sync_binlog is 0,
which does no synchronizing to disk. A
value of 1 is the safest choice
because in the event of a crash you
lose at most one statement or
transaction from the binary log.
However, it is also the slowest choice
(unless the disk has a battery-backed
cache, which makes synchronization