This normally happens if the headset is loose - when you go over a bump this makes the ball-bearings knock against the bearing races, which eventually hammers little depressions into it (the engineering term is brinelling, I think).
Take the headset apart and look for damage in the bearing races. If the races look okay then replace the bearings. If the races are damaged then you'll need a new headset as the races can't be replaced separately (or at least, I'm not aware of any models with separate races).
If it has cartridge bearings instead of loose ball-bearings then I don't think there's any chance of permanent damage, as the knocking action will damage the sides of the cartridge rather than the headset itself. A cartridge bearing looks like this.
This normally happens if the headset is loose - when you go over a bump this makes the ball-bearings knock against the bearing races, which eventually hammers little depressions into it (the engineering term is brinelling, I think).
Take the headset apart and look for damage in the bearing races. If the races look okay then replace the bearings. If the races are damaged then you'll need a new headset as the races can't be replaced separately (or at least, I'm not aware of any models with separate races).
If it has cartridge bearings instead of loose ball-bearings then I don't think there's any chance of permanent damage, as the knocking action will damage the sides of the cartridge rather than the headset itself. A cartridge bearing looks like this.
http://upload.wikimedia.org/wikipedia/commons/thumb/f/f0/Bicycle_headset_(threadless)_exploded_view-en.png/250px-Bicycle_headset_(threadless)_exploded_view-en.png