This enzyme normally converts the amino acid phenylalanine to tyrosine. If, due to a faulty or missing enzyme, this reaction does not take place, levels of phenylalanine in the body can be far higher than normal, and levels of tyrosine lower than normal. Excess phenylalanine in the blood harms brain development in the child, leading to mental retardation; low levels of tyrosine leads to lowered production of the pigment melanin, so children with this condition tend to be fair haired and blue eyed. The excess phenylalanine is converted instead into phenylketones, which are excreted in the urine - hence the name for this condition. The sweat and urine of an affected child has a musty odour due to these ketones.
The problem is readily detectable within days of birth from a small blood sample, so screening for phenylketonuria is done routinely in most industrialised countries, usually combined with testing for proper thyroid function. If diagnosed early enough, an affected child can grow up with normal brain development, by feeding with a diet low in phenylalanine.
1 in 100k ? http://www.ultranet.com/~jkimball/BiologyPages/P/Phenylketonuria.html says 1 in 10k (US). I also heard figures between these two. Could somebody check correct figures (which will vary from place to place) ?