You can buy lures in the shop on your island. To use a Fish Bait, select the bait next to your inventory and before casting the line throw it anywhere in the water. This will cause a fish to appear immediately, which will allow you to fish there.
Ultimately, Fish Bait is not an essential item when it comes to catching fish – but it saves you time to search for shoals of fish and waiting time for the fish to show up.