The way fish bait works is pretty simple, you walk up to some water, toss it in (from your inventory) and a fish appears in that spot for you. This will always be a fish that could normally appear in that spot at that time (You won't be able to get nighttime fish during the day, or fish from different months, or anything like that). It also doesn't appear to affect the price/rarity of the fish that appears at all.
Fish bait is useful for when you want to catch a fish that can only be found in a certain spot, though. For example, the ones from the pier. For the ones that just appear wherever in the ocean or rivers, I wouldn't bother if I were you. You can easily find those by running around.