<p>I have just started reading DDD. I am unable to completely grasp the concept of Entity vs Value objects.. Can someone please explain the problems (maintainability, performance.. etc) a system could face when a Value object is designed as a Entity object? Example would be great...</p>

Reduced to the essential distinction, identity matters for entities, but does not matter for value objects. For example, someone's Name is a value object. A Customer entity might be composed of a customer Name (value object), List<Order> OrderHistory (List of entities), and perhaps a default Address (typically a value object). The Customer Entity would have an ID, and each order would have an ID, but a Name should not; generally, within the object model anyway, the identity of an Address probably does not matter.
Value objects can typically be represented as immutable objects; changing one property of a value object essentially destroys the old object and creates a new one, because you're not as concerned with identity as with content. Properly, the Equals instance method on Name would return "true" as long as the object's properties are identical to the properties of another instance.
However, changing some attribute of an entity like Customer doesn't destroy the customer; a Customer entity is typically mutable. The identity remains the same (at least once the object has been persisted).
You probably create value objects without realizing it; anytime you are representing some aspect of an Entity by creating a fine-grained class, you've got a value object. For example, a class IPAddress, which has some constraints on valid values but is composed of simpler datatypes, would be a value object. An EmailAddress could be a string, or it could be a value object with its own set of behaviors.
It's quite possible that even items that have an identity in your database don't have an identity in your object model. But the simplest case is a composite of some attributes that make sense together. You probably don't want to have Customer.FirstName, Customer.LastName, Customer.MiddleInitial and Customer.Title when you can compose those together as Customer.Name; they'll probably be multiple fields in your database by the time you think about persistence, but your object model doesn't care.