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The windmill represents technological achievement and gives the pigs a way to distract the animals with hopes of a better future.
The windmill was the future that was never meant to be. It was easy living, and the good life. A windmill meant electricity, and less work. It is a fantasy and pure propaganda.
The animals had never heard of anything of this kind before, … and they listened in astonishment while Snowball conjured up pictures of fantastic machines which would do their work for them while they grazed at their ease in the fields or improved their minds with reading and conversation. (Ch. 4)
Snowball, the idealist, had the grand idea. He was going to make things better for the animals. They believed it too. He probably did as well. The problem with ideals is that this is all they are. Snowball’s ideals got him killed, most likely. He is driven off the farm and used as a scapegoat thereafter. Everything that goes wrong is blamed on Snowball.
However, his idea of the windmill is very convenient. Whenever the animals need a distraction, they can be building the windmill, and they won’t look too closely at what is really going on. When the windmill gets too close to getting done, it can mysteriously be destroyed in a battle or other disaster. This can go on indefinitely, so that the pigs are always in control, and the animals never get their freedom. Animals resting and free would be very bad for the pigs indeed.
Notice how Napoleon was against the windmill, which Snowball painstakingly designed, when it was Snowball’s idea, until he found a way to work it to his advantage?
All of them came to look at Snowball's drawings at least once a day. Even the hens and ducks came ... Only Napoleon held aloof. He had declared himself against the windmill from the start. One day, however, he arrived unexpectedly to examine the plans. (Ch. 5)
As soon as the plans are done and Snowball presents them, Napoleon produces guard dogs to chase Snowball out. Squealer goes into propaganda mode, telling everyone that he had never in fact been opposed to the windmill, that it had been his idea all along, and that he only pretended to be against it to get rid of Snowball. He explains why they need the windmill, and that everyone will work hard to build it. The dogs growl, and everyone goes along with it.
This pattern continues. The windmill is the symbol of hope, and as long as the animals are distracted with working toward hope, they do not notice how terrible their lives actually are. As long as they have hope to look forward to, they do not realize how hopeless their lives are. As with many revolutions, they have simply exchanged one tyrant for another. Animalism promised equality, but what they got was animals subjugating animals.
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