If you've seen any submarine-themed movie, whether it's Hunt for Red October, the classic Operation Pacific, or Crimson Tide, you understand the severity of an incoming torpedo. Anyone who knows naval history knows that torpedoes are lethal to ships – just look at what they did to the liner Lusitania, the aircraft carrier USS Wasp (CV 7), and a host of other ships.
Back through World War II, the primary way torpedoes did their damage was with a direct hit. The impact of the torpedo on a ship's hull would drive a firing pin that sets off a warhead. The hope here is that the blast punches a hole in a ship, allowing water to flood in, causing the ship to list to one side or the other and, eventually, capsize. Generally, this approach worked well, but it could take many direct hits to do damage enough to sink a vessel. The Japanese battleship Musashi, for example, took over twenty hits from Mk 13 air-dropped torpedoes before she went down.
This was a problem — as defensive anti-aircraft capability developed, planes launching torpedoes needed to do so from higher altitudes, at faster speeds, and from further away in order to survive. This was not conducive to scoring the many hits you needed to sink the enemy ship.
In fact, with rare exceptions, the only vessels that use heavy anti-ship torpedoes today are submarines. The torpedoes used by planes and ships are often less than 13 inches wide and hold warheads packed with less than 100 pounds of high explosive. They're not that good against surface ships, but you don't need much to sink a sub that's a few hundred feet below the surface of the ocean.
The heavy torpedoes themselves have also evolved, and not just in tracking capabilities.
During World War II, the United States Navy fielded torpedoes equipped with magnetic exploders. However, they didn't quite work right. With bigger fish to fry and a war to fight, the U.S. Navy simply disabled them and went on fielding functional, contact exploders. These torpedoes helped force Japan's surrender.
But the magnetic exploder concept wasn't forgotten after the war — and for good reason: Hitting the hull does some damage, but if you want to really kill a ship, it's best to break it in two. The best way to do that is to set off the explosion just below a ship. That will damage the ship's keel in a process called "breaking its back." Modern torpedoes with magnetic exploders are designed to do exactly that.
You can see what that does to the former USNS Concord (ex-AFS 5) in the video below.