Dams create huge reservoir of water, which flood a lot of land upstream, causing the river lines to expand.
however people forget to mention that gravity is a zero-sum game. every area that is being rendered unusable upstream results in creation of new area downstream. More often than not these areas are near large cities which are usually located downstream.
Also it opens up new fertile river bed for agriculture.
Now coming back to your question. Sometimes government do not properly compensate the people that are being displaced or take care of the animals etc. But that is a fault of the government and not the science behind hydro-electrical.