Materials are collectible items that can only be used to craft other items. They are stored in a different section of the Inventory (the Craft Menu) with a limited capacity. The starting capacity depends on the Difficulty Mode selected before starting a New Game, but can be upgraded collecting or crafting Utility Belts.
There are 15 types of Materials. Two of them are hidden at the beginning of the game, but they can be unlocked later by acquiring special items (the Venom Tools unlocks Venom Drops; the Lighter unlocks Fuel). Materials are mainly raw items and herbs you can find all around the island.