Urine is processed in the kidneys, and moves from them to the bladder where it's stored. Holding back urine will eventually fill the bladder, and after a certain point of volume it will stay in the kidneys until it can be released from the body because the bladder can't expand to hold anymore.
It can cause damage to the kidneys, bladder and urinary tract.
Yeah, it can cause infection, plus there was a radio station that held a contest in my state a few years ago where you had to hold your pee and drink as much water as you could. The runner up actually died because of it. So yeah, it can be bad for you.
It's actually more damaging to the bladder and urinary tract, since the kidney's release urine as soon as it's produced. Usually when someone urinates on themselves it's because the bladder is full. Therefore, when the kidney's produce more urine it automatically empties the bladder. That's why it usually seems like you pee more after holding it for a while, or if you don't go in the middle of the night. The bladder can hold up to two kidney "flushes" before it becomes ABSOLUTELY necessary to go and you'll know when that is as the the urge to urinate will be uncomfortable. Therefore the bladder and urinary tract are at more risk for infection. Most kidney infections are do to untreated bladder infections.