Infrastructure is an important mechanic for the economic simulation of the game, simulating the cost of moving goods over land and creating the necessary, well, infrastructure to support wide-scale industrialization.
Infrastructure is represented by two distinct values that each State has: Infrastructure and Infrastructure Usage, which together determine its Market Access. So long as the Infrastructure in the State is greater than or equal to the Infrastructure Usage, everything is fine and the State maintains a Market Access of 100%, but if usage starts exceeding the available Infrastructure, Market Access will be reduced by an amount proportional to how much of the usage is not being serviced.
Just about all States in the game have at least a little bit of Infrastructure based on the technology level of the country that owns it and its state of incorporation (colonies have lower infrastructure than incorporated states, for example). However, over the course of the game, the most crucial aspect of your Infrastructure is the size of your Railway network. Railways, for example, is a Building that produces Transportation, an intangible good sold to Pops, but they are also your main source of Infrastructure.
This means that if you want to industrialize a State, it isn’t enough to simply build those industries there and have the Pops available to work in them, you also need to ensure that said industries have enough infrastructure to support them. This of course has a variety of costs involved in that infrastructure-providing Railways need both Pops to work them and access to goods like Coal and Engines.
There are alternatives that can be used in the short-term, such as using your Authority on a Road Maintenance decree to ensure the populace doesn’t allow the roads to fall into disrepair or become unsafe, but such options will never be sufficient in themselves for large-scale industrialization. Of course, Railways also grow more efficient over the course of the game with such inventions as Diesel trains and Electricity, requiring fewer levels of rail to support a certain number of Buildings.
At the end of the day, Infrastructure is meant to portray and simulate the cost of moving Goods across the land. When the sea is in question though, there are other things in play.