Industry refers to the total military and social production capacity of a planet.
Factories increase the industry value.
Industry is funded at a cost of 1 BC per point. You only have to pay half of any bonus production. So if you have 20 base industry points and a +50% starbase industry bonus, you only pay for 25 points of production. (20 base + (20 * 50%* 50%) bonus = 20 + 5 = 25)
A player selects how much of his industry is used with the "spending slider". However, it is only possible to use all of your industry points if you set your research spending to 0%. (Some people consider this to be a bug or design flaw.)
Population has no effect on your Industry rating.