What should we do
This looks like the nest of the Baldfaced hornet, and if at all possible, should be left alone.
They are beneficial insects that help control garden pests. Most people don't notice hornet nests until the leaves fall from the trees in autumn. If the nest is left alone (not hit or jostled) they are calm and peaceful and good to have around.
Since it is a communal nest though, they will defend it if threatened.
The nest is not reused from year to year, and will die with the onset of winter.
Here is a page on beneficial wasps: http://extension.umd.edu/hgic/insects/predatory-wasps
And on Baldfaced hornets in particular, and their control if absolutely needed: