Darwin dedicates this chapter as a sort of extension of chapter 6 (which discussed possible criticisms of his theory) specifically on the geological record. In context, the knowledge of the geological record in Darwin's time was not as large as it is today.
Darwin's main dilemma was that the fossil record was chock full of transitional forms. He knew that presently, it wouldn't be possible to identify transitional forms since it cannot be clear what they're transitioning into. He also recognized that similar existing species weren't transitioning into each other, but rather had a common ancestor that was different from both of them. "So with natural species, if we look to forms very distinct, for instance the horse and tapir, we have no reason to suppose that links ever existed directly intermediate between them, but between each and an unknown common parent," (Darwin, 270). The reason in which it is unlikely there would be intermediates between two living species is that both species would be subject to natural selection over the same time span and one would have to remain unchanged and the other would have had to undergone extensive change.
While it was understood in Darwin's time, largely due to Charles Lyell's research, that the Earth was much older than the Bishop Usher estimate of 6000 years. Yet it was nowhere near the modern accepted age of 4.5 billion years. Therefore, Darwin had understandable questions of whether the Earth was actually old enough to support his theory. The deepest strata uncovered in England was the Paleozoic strata.
A quick lesson on the geological time scale:
The Paleozoic era represents at it's deepest point 540 million years ago. Older than that is considered Precambrian (Stanford). In the last 50 years, the study of Precambrian age fossils has expanded and the oldest known life (microscopic single cell organisms) currently known comes from the Archean era (Schopf).
Fossilization is not an easy process, and many factors determine whether or not an individual is preserved. The specimen must be buried and petrified over time, however the remains may easily be destroyed or scattered by numerous processes (Stanford). The number of fossils known in Darwin's days were much smaller than what has presently been found. Darwin considered the paleontological record to be in a sorry state. Darwin correctly assumed that very few creatures are actually fossilized.
Another factor Darwin considered was the migration of animals to new areas and that an intermediate form may not be found near present day localities of species. He spends most of the chapter summarizing the known geological record and predicting why certain specimens (such as transitional forms) had not been found.
He also muses that even if a transitional form was found, it may not be recognized as such and variations can be categorized as separate species, leading to redundancy and confusion concerning relationships. This is still a concern today, with certain fossils being mislabeled, or one species given several names.
Darwin's main concern was the sudden appearance of complex fossils in the geological record, because for his theory to work, there would have to be more primitive forms before them. At the time, no fossils older than the Silurian stratum had been found, but as I mentioned earlier, Precambrian fossils have been discovered.
Stanford, C. Exploring Biological Anthropology. Pearson, Prentice Hall: 2008.
Schopf. A renaissance of Early Life. Geology Today Vol: 26, 2010.