From Diablo Wiki
Ethereal in the Diablo universe are items or entities that either belongs entirely or partly to the Ethereal plane, making the item or entity appear transparent, or sometimes appears otherworldly.
Ethereal Items are not returning in Diablo III. Not in the initial launch version, at least. They might be added in an expansion, as they were in D2X.
In Diablo Games
There are currently no known associations with the word "Ethereal" and gameplay mechanics.
Ethereal items will not be found in Diablo III.
Diablo II & Diablo I
In the older Diablo games, "Ethereal" is primarily associated with the attribute of some that are called specifically .
These items deal 50% more damage or provide 50% more defense, at the cost of 55% less durability and no option to repair them. They are best used with a Zod rune, with self-repairing mods, or on Mercs, who do not use up weapon or armor durability.
Technically, Wraiths and other similar incorporeal undead should be ethereal beings as well, but whether or not this holds true, or if their ectoplasmic content possibly works different on Sanctuary is unknown.
What Does "Ethereal" Mean?
To quote the dictionary:
1 a : of or relating to the regions beyond the earth
b : celestial, heavenly
c : unworldly, spiritual
2 a : lacking material substance : immaterial, intangible
Not that any of this really matters in the game, it's just a cool word Bliz chose to fit the idea of bonus/no-repair weapons.