ITZ in civil engineering terminology is known as interfacial transition zone or intermediate transition zone. This is the phase present in concrete where two different phases meet with each other. As you can see in the picture you can see clearly the layer of ITZ present.
In concrete aggregate is considered as one phase and surrounding paste is considered as another. For concrete to bear load, it is imperative that there should be stress distribution between paste and aggregate.
When these two phases of concrete meet, there is always an ITZ layer present. This layer has properties which are neither of aggregate phase nor to the paste phase.
What happens is when that near aggregate slurry (water+cement) accumulates causing a layer which is shown in picture below. This layer is week because of its chemical composition.
In reality, ITZ has probably the lowest strength properties therefore under loads stress in aggregate phase will be different than that of the paste for same strain level. This type of non-uniform stress distribution will cause ineffective transmission of forces between paste and aggregate. If ITZ is not taken care of than this can lead to stress concentration which will ultimately cause cracking