What's Wrong with this Picture: Disconnected

ANSWER: Disconnected Flue Pipe

The venting system of this gas fired water heater is obviously not performing as designed. If this home is occupied, the occupants are at risk for carbon monoxide poisoning.

The venting system should include a secured draft hood immediately located at the exhaust exit point at the top of the water heater. This draft hood then funnels combustion gases into a flue pipe, which is configured to travel to the exterior, where the gases are released harmlessly into the atmosphere. Flue pipes should have an upward pitch of ¼ inch per foot minimum from the heater to the chimney connection to facilitate complete venting. Ideally, venting pipe should extend at least 5 feet above the draft hood for optimal drafting.

As an additional note, exhaust pipes can get quite hot and should have minimum clearances to combustible material when installed.