You can identify Hemlock Woolly Adelgid (HWA) by looking for a white woolly substance found on the base of the needles. This woolly substance is actually a mass of eggs.
These small adelgid insects suck on the sap of hemlock trees causing a tree to slowly lose its vigor over time. As the insect continues to feed and spread throughout a tree, the needles will turn gray and begin to shed. From a distance, a tree will look very stressed and unhealthy as its foliage thins out and bare branches are exposed. Over time, severely infested trees will die.
Close-up photo from the Connecticut Agricultural Experiment Station.