Many older homes have below grade basements or cellars, which serves as housing for the utility system and occasional storage. Mildew, mold and occasional water seepage often inhabit these older homes. Waterproofing contractors tend to prey on the fear and ignorance of home owners who experience seeping into their basements. This accounts for why so many expensive and inappropriate systems are installed to "cure" the water problems.
It is estimated that more than 90% of the basement water seepage is due to inadequate roof and yard runoff controls. Those waters are a surface source which builds up hydrostatic pressure the deeper into the soil it seeps. When you have a surface water problem, the cure usually has all to do with surface water controls.
It is actually rare when water rises up from beneath a basement to seep into it. Aquifers, which are usually large reservoirs of water down deep in the ground, tend to rise and fall very slowly with rainy weather or droughts. When a dewatering system is installed without mitigating surface water sources, the worst case long term result can be complete foundation failure. The early warning signs for such a horrible event are often foundation cracking, etc.
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This is a crawlspace which has apparently been dug out by an owner. This effort has created a large hole under the house which has no walls supporting the sides of the hole. Surface water from roof and yard runoff soaks into the soil and seeps into this area. The result is that the sides of the hole are continuously eroding and caving in. Unless this process is stopped, it is likely that the hole will continually enlarge to the point where the original foundation is threatened. This is a largely misguided effort wherein someone likely wanted some storage space beneath the house.
Most professional home inspectors will warn potential buyers that a serious structural problem exists with this house and that it is very likely that repairs will be very expensive. Essentially, new foundation walls will have to be installed, which will require that footing areas be dug out and poured and then walls installed on top of those footings. Given the wet soil seen, it is very likely that roof and yard runoff controls will have to be implemented as well. The exposed dirt of the original crawlspace should be carefully covered with a vapor retarder to control moisture rising up into the house above.