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Emperor Augustus ordered his army to subdue the Germanic tribes in what is modern Germany. This was promptly achieved and by 6 AD the Romans controlled Germany up to the river Elba.
The Romans were however betrayed and defeated in the Battle of Teutoburg Forest, in 9 AD. Afterwards, they abandoned the region and established the limes on the Rhine and Danube rivers.
The Roman Empire outlasted this defeat for half a millennium: why there was no further attempt at conquering the region?
To sum it up: The costs simply outweighed the benefits.
You have to consider that Germania at this time was essentially one huge forest, which was very, well empty. No cities to conquer, the first German cities were actually founded by the Romans, like e.g. Aachen, Cologne or Trier. The Germans were primitive tribesmen and had little to offer to the Roman Empire. Yet they were warlike and fought many hard battles against them. Although the Roman armies were generally much more advanced with regard to arms technology and tactics, there were also huge setbacks like the Battle of the Teutoburg Forest.
Even Germanicus' campaign from 14 to 16 AD is not considered a success. While Germanicus won the battles with only small losses, he lost ships and material to a storm in the North Sea after a generally successful campaign, and was recalled later.
Consider also that the northern European climate is not very attractive for people who are used to the Mediterranean. You might want to read what Roman historian Tacitus wrote about Germania, the land and its inhabitants:
Then, besides the danger of a boisterous and unknown sea, who would relinquish Asia, Africa, or Italy, for Germany, a land rude in its surface, rigorous in its climate, cheerless to every beholder and cultivator, except a native?
Another fact that should be taken into account is that the Roman invasion actually created a dangerous enemy for the Roman Empire, as the German tribes of that time were rather small groups that were hostile towards each other. In my opinion, only the threat of Roman aggression allowed leaders like Arminius or Marbod to unite them into larger groups that presented a real threat at the Roman borders.
So that eventually, the emperor Tiberius recalled his nephew Germanicus and decided to leave the Germans to their own discord (I can't find an English translation of the exact quote). In my opinion, this is exactly what the Romans would repeat later in northern England/Caledonia, where they decided that further conquests of hostile territory and peoples were not worth the effort, and just put up a wall (the limes in case of Germania, Hadrian's wall in England) to guard the frontier.
The Romans were able to "conquer" large parts of Germania, briefly. They were unable to HOLD it for any length of time.
The reason stemmed from the region's "backwardness." There was no central government or central power through which the Romans could operate. There were no cities (except the ones the Romans built). There were few roads, and the country was broken up by large forests, through which it was difficult to "project" power.
Hence, the Romans would have to control the country on a tribe-by-tribe, village by village basis if they could do so at all. That is a tough exercise. (The most recent modern example is the United States in Vietnam.)
Like we discussed in my answer in Why China was able to unify and not Europe?.
This video documentary gives an explanation:
The Germanic tribes, although being quite capable fighters didn't have enough to offer the Romans. The area was poor and difficult and dangerous to travel, like the massacre of 9.AD. proved.
So the most beneficial activity for the Romans was to just apply divide and conquer upon it to keep them divided and weak, and at that just stay out of there.
It's not that they weren't able to. Had the Roman empire taken on the task with full force to take over Germania they pretty surely would have succeeded. But just conquering for the sole purpose of conquering isn't what matters really are about. It's about economic interest, you have to benefit more from the conquest, all variables taken into account, than what the conquest costs.
And conquering Germania simply wasn't a profitable endeavour.
Well, the Romans did conquer "Germania", specifically, Southern Germany-(parts of greater Bavaria) and especially Western Germany-(The Rhineland).
In fact, many of Germany's oldest cities, were founded or heavily populated by Romans. Trier, for example, is Germany's oldest city and its Roman ruins are very well preserved among the larger Medieval looking town. One of Germany's largest cities, Cologne, was also founded by the Romans around 40 AD/CE. Even the famed Casino town Baden Baden, also known for its hot springs, dates back to the time of the Roman Empire. The Emperor Constantine established his Church-Palace in Trier-(and it is located on, "Konstantinople Road") and Trier's most sacred Cathedral, known as The Cathedral of Trier, was also founded by Constantine and his Mother Helena.
So, as one can see, the Roman colonial legacy within greater Germania/Germany dates back 1700-2000 years ago.
As far as I know, the Romans did not conquer what is today, Central and Northern Germany, namely, the Saxon region or the area around Berlin. However, the Roman colonial presence within Southern Germany and especially Western Germany/The Rhineland, is well documented and in the cases of Cologne and especially Trier, there exists a well preserved Roman architectural legacy as well.
To add to the existing answers, I think an important factor to consider is the population growth of Germans.
Germanic people came to Germania from Scandinavia, probably mixed with the native Celts, then their population continued to grow, eventually spilling over into the Roman Empire (France, Britain and Italy)
Each century when the Roman Empire coexisted with the Germans, the Germans were getting stronger, or at least more numerous, reducing the prospects of the Roman invasion.
