I've been trying to wrap my head around the HRE for years, but I still can't do it. I'm hoping I can get some answers here to help me figure out this mess of a country.
•First off, how did it become so decentralized?
•Why did it become so fragmented into thousands of states instead of more powerful ones (Bavaria, Württemburg, Saxony etc.) absorbing smaller ones?
•What degree of autonomy did the HRE's states have?
Here are past answers & discussions listed in the FAQ section on "The Holy Roman Empire and Centralization":
Feel free to ask followup questions by commenting with /u/ appended to a flaired specialist's username (i.e. /u/OldWorldGlory).
Key:
HRE = Holy Roman Empire
c = comments
dy = days old
wk = weeks old
mo = months old
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[11 c | 10 mo] Increasing decentralization over time, long response
[6 c | 2 yr] HRE decentralization as Imperial decentralization, flaired respondent
[5 c | 2 yr] Brief, many sources
[4 c | 1 yr] In context with contemporary states
[6 c | 3 yr] Autonomy, foundation & early history, Imperial power & law, flaired respondents
[76 c | 10 mo] Border administration & changes, HRE law
I'm not an expert on this, so someone might correct me... A very interesting overview of the HRE, for me, was one of the first chapters of "The Thirty Year's War", by Peter Wilson. It gives an overview of the Empire as it stood before the war, and I found it to answer questions about the empire that I didn't even know I had...
So, why was the HRE so decentralized? It was due to its state as a feudal system. The emperor was at the top, then followed his immediate vassals, and then their vassals, etc, all the way down to the local communities. This is what decentralized it: the emperor didn't have direct control over the empire, but had authority over his vassals, which had authority in turn, etc.
For its fragmentation, the empire was divided into (direct fiefs): 180 lay and 130 spiritual fiefs, all varying in size/political influence. These would be divided further into smaller fiefs, which could be held separately. They would get transferred, for lay fiefs, by inheritance or purchase (subject to the emperor's approval). What it means is that families would be able to accumulate land through marriages, in many cases - famously, the Habsburgs, which got much of its land through inheritances. Interestingly enough, by the Thirty Year's War, most matters weren't resolved through internal wars, but through judicial courts according to the Imperial Constitution. In 1495, the Reichstag even agreed to a 'perpetual public peace, obliging the emperor and all his vassals to submit their disagreements through a new supreme court, the Reichskammergericht"
For degree of autonomy, it would depend on the state I believe. The direct vassals to the emperor would have a good amount, and would have representation in the Reichstag (Parliament) based on payment of a tax (to secure the representation). In their own territories, princes would have control, as long as they followed the Imperial constitution and their obligations to the emperor. It's described as "These rights gave whoever possessed them a claim on the respect, subservience, and resources of those bound by them. A lord exercising jurisdiction over a village could expect the deference of its inhabitants, a share of their produce, and some of their time and labour for certain tasks. In return, he or she was expected to protect their interests against malevolent outsiders, uphold their communal distinctiveness within the wider imperial framework, and to intervene in the management of their internal affairs to resolve serious problems". The control/autonomy, thus, was more of an interconnected web of powers and duties held both to their liege the emperor, but their own holdings (directly to the people of the land, or their own vassals).
However, the degree of autonomy would vary by the time period, so it makes it tough to precisely define it, and they were only slowly defined: "The emperor was overlord and sovereign, holding considerable reserve powers that derived directly from his title rather than possession of any fief. These imperial prerogatives were deliberately left vague, because fixing them in law would imply limits to the emperor's universal pretensions." It seems to have developed into the judicial system of the empire, along with the Reichstag, to help define the powers of the emperor to some extent.
Hope that helps to some degree, let me know if you have questions about it and I'll see if I can clarify it - I might not be super clear ><