Combat effects and movement effects. Tanks fight better in the open, worse in forests, etc. Terrain also effects entrenchment levels, which give a bonus to defense. Terrain includes light and heavy forest, open (fields), minor and major rivers, low and high mountains, light and heavy urban, fortifications, roads and rail (for strategic movement). Also, some terrain provides more cover from air strikes and (maybe) artillery.
Also, supply is affected by Terrain as well. It's better to have a road/rail network than a supply trail through the forest.
Terrain plays an important role.