Literally, impingement means contact or collision between the upper arm bone and the softer parts of the shoulder. When does impingement occur?  Stretch your right hand out in front of you. When your thumb points up, that is the neutral position.  When you twist your arm so that your thumb points to the left, that causes moderate internal rotation of your shoulder.  When you twist even farther, so your thumb points down and your pinky points up, that causes extreme rotation of the shoulder.  In plain English, the upper arm bone is rubbing against the soft muscles and tissues harder than it would if your hand and arm weren't turned out. Many swimmers do swim with extreme or moderate internal rotation without apparent pain or injury, but for many other swimmers, constant extreme internal rotation during swimming will eventually cause impingement, irritation, chronic pain and injury. Some research indicates that even moderate internal rotation while swimming tends to increase shoulder impingement.
Cecil Colwin's illustration of the crawl stroke from Swimming Dynamics, above, shows the swimmer's reaching hand parallel to the surface of the the water, and his body perpendicular to the surface. The swimmer has internally rotated his leading arm about 180 degrees, so he is potentially causing impingement in that shoulder.

In Swimming Even Faster, Maglischo's illustrators show less body rotation than Colwin, but still the swimmer internally rotates her arm through the pull.

These illustrations, from top-selling swimming books by notable swimming gurus, would lead us to believe that maintaining extreme internal rotation of the arm is the best way to swim.  So would any video of Alex Popov, Gary Hall or Ian Thorpe from the 2000 Olympics.

But, "according to the published study of Yanai and Hay, 40% of impingement occurs during recovery, 40% at entry, and only 20% at pull through.  In someone with really bad shoulders, you want to maintain external rotation during all phases. But you can get rid of 80% of impingement just by maintaining external rotation during non-propulsive phases of the stroke.  This is important, because many people advocate internal rotation during pull through as being more efficient. So, if your shoulders are only a little bad, but not really bad, then avoiding internal rotation during recovery and entry will get rid of 80% of the problem."

On the right are Colwin's illustrations of the crawl, from Swimming Dynamics. which lend themselves to general comments about swimming.

Colwin draws the recovering hand parallel to the body, the usual propulsive attitude. Unlike Maglischo, he draws a straight-back pull with the hand only moderately internally rotated, which presents lower risk of impingement.

Look at the swimmers hands as they enter the water. As with Popov and Thorpe, the entry hand is flat, almost parallel to the surface of the water.  Even during the reach, before starting to pull, Colwin expects the hand to be in a propulsive attitude towards the water. Maintaining this hand position while rolling the body will lead to internal rotation during the entry (figs 1-5), which Yanai & Hay identify as causing 40% of impingement.

That Popov and Thorpe swim this way without injury shows that impingement is not inevitable for all swimmers, simply more probable for certain individuals.  Should you experience shoulder pain however, eliminating internal rotation, especially extreme internal rotation, from your stroke might help.