Ketone production in diabetes causes a condition called diabetic ketoacidosis, which is a form of elevated anion gap metabolic acidosis.

If hyperglycemia is left untreated, it can lead to ketoacidosis.

Diabetic ketoacidosis is caused by lack of insulin, and is generally triggered by some other body insult including dehydration, fasting, illness or infection.

Once ketoacidosis begins in earnest, it causes itself to get worse. All of its symptoms are also causes of further problems, so it will generally continue to advance until treatment or death.

More details on the mechanism of how ketoacidosis begins are available on the wikipedia link below.

Ketoacidosis is often associated with hyperglycemia (high blood sugar), but hyperglycemia won't actually cause Ketoacidosis. They are both caused by shortage of insulin.

Diabetes

One of the first signs of ketoacidosis is an unpleasant smell on the breath as well as ketones in the urine, if your insulin is kept at the correct level and you eat a sensible and balanced diet including slow release carbohydrates you should not go into ketoacidosis.