The introduction has two functions: to introduce the project (why you're doing it, what part of your degree it takes (if you haven't already said that in the preface), and what the aims were), and to introduce the report (what is coming in the following sections). After reading this, the readers should know what the project is about, why you are doing it, whether they have the necessary background to read the rest of the report, and know how to find whatever they want in the rest of the report.
As one famous American orator once said, when asked how he planned his talks: "first I tell 'em what I'm going to tell 'em, then I tell 'em, then I tell 'em what I told 'em". While I wouldn't entirely agree with that advice for presentations, it's not a bad structure for a technical report. The introduction is the chance to tell the reader what you're going to tell him.
Probably the most common fault with introductions is that they go into too much detail, too fast, assume knowledge that the reader doesn't have, and don't put the report in context. A useful vision image is that of a cone: the first paragraph of the introduction should be very broad, giving the so that everyone can understand how the subject of the report relates to something they are already familiar with. Then the following paragraphs should narrow the focus, explaining what part of the previous paragraph the report is concerned with, and explaining why it is an interesting part of the wider problem. The last paragraph can then introduce the specific subject that the rest of the report will consider.
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