Gravel is formed of rocks that are unconnected to each other. While common perception of gravel is smaller rocks anywhere between one and three inches around, official designation of gravel includes any rock structures that are not connected to other rocks, even enormous boulders (Wikipedia). Gravel is found naturally, mostly in lake, river, and ocean beds, where the constant movement of the water and waves keeps the gravel from settling and fusing with other rocks; sand is a form of micro-gravel, being tiny stones worn down by constant motion. There are also gravel deposits on dry river and lake sites, which are usually covered by layers of silt and dirt.
Gravel deposits are mined and sifted to create commercial gravel products, which are used in many industrial applications as well as construction. Where natural gravel is scarce, solid stone deposits and bedrock are mined and broken up by machines. Gravel is commonly used to lay beds for roads and foundations; loose gravel is often used on pathways and ornamental gardens. Smaller stones as well as lower-quality stones are often used in cement and blacktop applications, as it adds strength while being relatively cheap. Because of its many uses, gravel remains an important part of industry, and the United States is the leading producer of gravel worldwide.
Gravel is mostly found naturally in riverbeds and dry river and stream gulches although other types also exist. Sizeable deposits are a common geological feature all over most of the world, due to the effects of weathering and erosion of rocks by water; and generally, large accumulations are piled up and these are 'harvested' by people (in most places, generally contractors) for various building/construction purposes. Gravel can be of different types e.g Bank gravel, Bench gravel, Creek rock, Crushed rock (which has been artificially crushed by machines) and so on.
Gravel has wide building applications and is used in concrete/cement making, road making (gravel roads are more common in most parts vis a vis tarmac or concrete ones proper), addition or mixing with cement for house/building construction and so on.
The United States of America is the world's largest gravel producer.
Gravel is generally found in nature in river beds but this is not suitable for building industry including road construction due to its rounded shape. This round shaped gravel is used as filter material in dams, water filtration plants and sub-soil drains for amelioration of saline soils.
The gravel used in building and road industry is obtained from rocks excavated from quaries. The rocks are mined by mine blasting using dynamites and then further breaking them to the equired size with the help of mechanical crushers.
Graded gravel is used for building industry and are classified as under 1inch or under half inch etc. For example under 1 inch means stone passing through 1inch grit and will contain all broken-stone of all sizes under 1 inch. A composite gravel having all sizes is more suitable for construction as it has a very small volume of cavities which is later filled with sand to form solid concrete. (Concrete is a cement, sand and gravel mixture in more commonly used ratio 1:2:4).
In road construction, gravel of coarser grit is used and may be as coarse as 4-inch.
Originally river rum gravel was used for road construction but it was found that round shaped gravel slips and does not stay in place and damages the road so after studies irregular shaped gravel has become a standard in road construction.
For uses of gravel please see my answer in link: http://www.enotes.com/science/q-and-a/where-sand-found-how-used-by-building-industry-358136