I have a problem with the intuition behind structural induction. We didn't define it rigorously in my lecture and I don't get the concept yet. The concrete example of what I don't understand is proving that for terms $r$,$s$ and a free variable u, the 'thing' that results when I replace $u$ in $r$ by $s$, in our notation $r[s/u]$, is a term itself. I can do the formal proof by using structural induction, but this is only by applying a formal procedure that I don't have an intuition for yet.
if $r$ is a free variable, then r[s/u]=r or r[s/u]=s, and consequently a term (by definition)
if $r=f(t_1,...,t_n)$, where f is a function symbol of ${n\in\mathbb{N}}$ variables, and $t_1,...,t_n$ are terms, then $r[s/u]=f(t_1[s/u],...,t_n[s/u])$ by definition. Since $t_1,...,t_n$ are terms, the induction hypothesis provides that $t_1[s/u],...,t_n[s/u]$ are terms as well. Then by definition $f(t_1[s/u],...,t_n[s/u])$ is a term.
Now in the second step we say that $t_1,...,t_n$ are terms. I looked up the formal definition of structural induction and it says that it only applies for 'objects produced in finitely many steps'. Alright, I get this one. One can consider each $t_i$ separately using 1. or 2. and after finitely many steps arrives at the basic notion of free variable or constant, so 1. proves the claim. But how do we now beforehand that the object we consider was formed in finitely many steps? Why can't there be something like $f(t_1)$, where $t_1$ itself is of the form $f(t_2)$, then $t_2$ of the form $f(t_3)$ and so on forever. Or in the other direction, I start with a constant $c$ and put $f(\cdot)$ around it infinitely many times. I assume both of these 'things' aren't defined/definable. But why?
This might seem trivial for some, but for me it's not intuitively clear. Maybe someone can provide me some insight.