Someone pushed it in. Yes, it will degrade the sound quality.

Thanks. Now, if I opened the cabinet and popped it back out would that "repair" it?

You'll probably have to open something other than the cabinet. The aluminum cover may be covering a softer (fabric or such) dome. The good news there is that if you remove the aluminum cover you may be able to pop the dome back into shape.

Then again, you may not. It's kind of like fixing a dent in a car without using body filler. You also run the risk that you don't put the cap on right and it resonates at some high frequency which might be heard.

Honestly, if the tweeter sounds like it did and the damage is mostly cosmetic, I'd leave it be. You could cause more damage trying to fix it than you're hearing now.

Were it mine, I would unscrew the tweeter from the cabinet, and like Steve suggests, unscrew or unclip the dome from the magnet if it can be done, paying careful attention to how it aligns. I would then try to push the dome back into shape. However, since these diaphrams are often burnt out by being overdriven, many manufactures will sell just the diaphram. If your speaker is a well established brand, you should be able to contact them or a local dealership and buy just the diapham if you need to.
Steve too.

Good news. I was able to go thru the front and just detach the aluminum dome. It popped back into shape with just a little pressure from a finger. I smoothed out as much as possible what lines were left with a Q-tip. Finally, I stuck my ear in the damged one and then the good one listening to a variety of music and couldn't hear a difference, but maybe I have a "tin" ear. These are twenty-year-old B&Ws engineered by the guy who left and started Krell. So these speakers will be as close as I'll ever be to his products again and I may just keep them as my two channel speakers. Thanks for your interest and input...