How does hepatitis affect my liver?

Inflammation. The causes of hepatitis are several, but i'm assuming you mean to discuss viral hepatitis. By constantly causing inflammation to the liver, the liver eventually loses its ability to regenerate quickly, and starts to become fibrotic, and then cirrhotic, which decreases its function. Eventually, this may lead to the risk of liver cancer.
Inflammation. Hepatitis means inflammation of the liver. Many things can cause "hepatitis" such as viruses (hep a, b, c), medications, alcohol, genetic diseases, and others.