When a project is deleted, all its data is deleted too. No one in your team will be able to log time on that project anymore or check any of its past reports. Everyone who worked on that project will be notified. You won't be able to undo this operation, so make sure that's really what yo want to do!
If you want to keep the project data but need to cleanup your list of projects, you might want to use the Archive or Merge actions instead.