The allegations are unverified. Michael Cohen says he has never even been to Prague. [eta: We now know this was a lie.] Mr. Trump is all-caps screaming FAKE NEWS. Interestingly, WikiLeaks immediately denounced the dossier. ( https://twitter.com/wikileaks/status/818992803829137408 )
The source, according to CNN, is a former British intelligence agent who now runs a private security and intelligence firm. (See: http://www.cnn.com/2017/01/10/politics/donald-trump-intelligence-report-russia/index.html ) Quoting CNN: "The allegations came, in part, from memos compiled by a former British intelligence operative, whose past work US intelligence officials consider credible. The FBI is investigating the credibility and accuracy of these allegations, which are based primarily on information from Russian sources, but has not confirmed many essential details in the memos about Mr. Trump." CNN also reports that these documents were included in the intelligence briefing with Mr. Trump this week.
Here is Buzzfeed's story on the allegations:
Here is Buzzfeed Editor-in-Chief Ben Smith's letter to his staff about their decision to publish:
Mother Jones had material on this before the election, and published this story, which I forwarded around some at the time:
This is a reasonable reaction writeup - "Take a deep breath," on Lawfare Blog: