Some doctors say that it can eat away at the white matter of the brain and also enlarge ventricles implying brain damage. Most top psychiatrists I've talked to say "the jury is still out" on the matter.
So as of now, no one really knows. But even if it did cause brain damage, as long as you take your meds, you may never have a psychotic break again. Just work hard at brain exercises and reading and writing, (that's what I do,) and new neurons will regenerate and help you get back to or close to normal. However the disease of schizophrenia itself can cause neuropsychological damage throught depletion or too much neurotransmitters. So if you have schizophrenia, most studies say you will stay about the same for life.
However, some of the best doctors in the country at The Freedom Trail Clinic told me that many people do improve significantly, despite these studies. So I guess it would depend on the person.