what happens when InnoDB logspace is too small I've just seen several mysql errors in my log:

InnoDB: ERROR: the age of the last checkpoint is X
InnoDB: which exceeds the log group capacity Y

I understand, that I do have to increase the innodb_log_file/buffer_size setting in order to fix the issue.
What I don't understand is, what happens to my data when this error occurs?
Does MySql skip the log buffer file and write the corresponding data to the bin log directly?
The InnoDB Logfile is not related to your Binlog.
The InnoDB log is used in case of crash recovery. So you may loose some transactions in case of a crash. In addition to that a small InnoDB log can impact your overal MySQL performance because MySQL has to flush the data very often to disk if you have a small iblog.

In short: there is no direct impact impact when this error happens, but if you encounter a mysql crash you may loose some transactions.
In addition to that you can optimized your IO performance if you increase the size because the logfiles are sequential IO which is much faster than the random IO if you have to actually write your data to the tablespace.