Removing the pinion joint of a bird stops the growth of the primary feathers, preventing the acceleration required for flight[1] and is analogous to amputating a human hand at the wrist.
It is similar to other forms of modification and surgical procedures of domestically raised animals, such as docking the tail of a dog and declawing on a cat.
Apart from the prevention of flight, there is commonly thought to be little long term negative effect from pinioning if performed correctly and at a young age.
[1] Evidence also suggests that pinioning may cause a phantom limb syndrome similar to what is observed in human amputees.
Permanent enclosures designed to prevent accidental egress (escape) of birds remove the need for pinioning.