Decentralization in Theory and Practice

I've been pondering this question for awhile now and have only been pushed to consider it even more strongly since I've been here in Mexico.

What is it exactly that anarchists mean when they talk about a society based on "decentralization"? What is being decentralized?

My experiences here in Mexico City have taught me that, if nothing else, decentralization of institutions is incredibly frustrating and inefficient. Decentralized capitalist institutions like immigration have provided me with a great deal of irritation, but that's understandable, as they are premised on a giant bureaucracy that makes things difficult to accomplish. Surely in an anarchist society, we wouldn't need the extensive decentralized bureaucracy that say, the Mexican or U.S. migration process provides.

But decentralization in our daily lives of institutions would mean a whole host of different problems. Take decentralization in institutions of learning. I'm familiar with the critique of schooling, but I'm still a firm believer that we can radically restructure education in order to produce institutions that educate without indoctrinating. Here, at my university in Mexico though, decentralization is already the rule of the day. There are literally dozens of autonomous bodies that make decisions which affect themselves but which carry consequences for the whole university. This means that inscription, application, class schedules, as well as more "institutional" tasks like maintenance of facilities require a knowledge of a Byzantine bureaucratic labyrinth to navigate.

This is obviously just one example, but I want to apply it to the theory of decentralizing all of our economic and social activities. What exactly does decentralization imply in terms of the daily lives of people and their well-being? The effects of decentralization in capitalist society reflect in some bizarre manner the so-called centralization of the economy in state socialist societies, where the centralization of power with the state resulted in a profuse diffusion of bureaucracy.

Am I just suffering the irritations of the infamous Mexican impulse towards bureaucracy? How can we decentralize our activities and institutions without creating shortages that could be potentially fatal? That is to say, moving beyond my rather silly example of an educational institution, what potential dangers would a decentralized agricultural system bring? How can anarchist theory account for, and plan to deal with, for these issues?