A crack in the road surface lets water through. That may wash a little material away and get underneath where it tends to lubricate the stones forming the base so they move when the weight of a vehicle goes over.
Worse is if it freezes during the winter months. Ice takes up more room than the water it came from and the expansion forces cracks open. When it thaws, the unsupported edges crumble, letting more water in and the cycle continues on the next freeze.
Once you get a large enough pothole, wheels jolting into it excavate more and more material.
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