I wasn't able to understand where the contradiction is in this proof of the irrationality of $\sqrt{3}$.
Suppose $$\sqrt{3}=\frac{a}{b}$$ where $a,b\in\mathbb{N}$ and the fraction is in lowest terms. Observe that $$3(a-b)^2 = (3b-a)^2.$$ So, $$\sqrt{3}=\frac{3b-a}{a-b}.$$ From the first assumption, $a-b<b$. This implies that we can descend through infinitely many other fractions with smaller denominators, however, that is impossible.
Is it impossible because you can't have an infinite decreasing chain of positive integers ? Or is the contradiction the fact that we assumed the fraction is in lowest terms but we produced one with a smaller denominator ? Moreover, where does this proof break if we use, say, $4$ instead of $3$?
Rather than focus on the specific proof you're looking at, I'm going to try to explai infinite descent in general. This should arguably be a comment but it's a bit long.
Infinite descent, as you guessed, uses the fact that there is no infinite descending sequence of natural numbers (that is, the natural numbers are well-ordered - this is a notion which will come up again down the road, especially in logic).
That this is the case can be proved via induction (so if you believe induction, you should believe infinite descent): suppose $a_1>a_2>a_3>...$ are natural numbers. Let $A$ be their "upwards closure" - $A$ is the set of natural numbers bigger than some $a_i$. (In symbols: $A=\{x\in\mathbb{N}:$ for some $i$ we have $x>a_i\}$.) Now think about the complement of $A$.
Clearly $0$ is in the complement of $A$ (there are no natural numbers at all below $0$, so in particular $0$ isn't above any of the $a_i$s). Now suppose $n$ is in the complement of $A$. Then $n+1$ must also be in the complement of $A$: if $n+1$ were in $A$, we would have $n+1>a_i$ for some $i$, but then we would have to have $n>a_{i+1}$ since $a_i>a_{i+1}$ by assumption. This can't happen since we assumed $n$ was in the complement of $A$, so we have a contradiction. By induction, we can now conclude that every natural number is in the complement of $A$. Oops!
Conversely, you can also use infinite descent to prove that induction works (after understanding the above argument, this will be a good exercise). So infinite descent is really just another way to think about proof by induction.