"What is the situation?" is asking you to define the situation. You ask this question when you don't know what's going on. "How is the situation?" is asking for how good or how bad the situation is now. You already know about what's happening.

Someone would ask "What is the situation?" if they are not yet familiar with the situation, and "How is the situation?" if they already know the situation and are seeking an update on it.

I would have to agree with Dlynell.