An ethereal unit has a 75% chance to negate any non-magical damage inflicted on it. This includes:
Ethereal beings can also scale walls, both in battle and outside them, and may not be frozen as a result of suffering cold damage. They also suffer no consequences from bleeding or burning; sure, their arteries might be opened and they might be going up in smoke, but that doesn't matter when they're immaterial already. Last but not least, they're immune to most forms of Entrapment, with the exception of False Fetters and Bonds of Fire.
Etherealness does not protect against Internal Damage, such as the 4% conversion rate of Fatigue past 200 into HP damage, or the damage done to one's body by Disease.
To know if a damage source is magical, check for a white star left of its damage number. You should also check for this on spells; several combat spells have nonmagical effects, most of them being pure Earth ones such as Blade Wind or Earthquake. Interestingly, spell effects that target bones to deal damage or Afflictions are considered non-magical for this purpose.
While commonly associated with Ghosts, Etherealness is mainly an Astral buff;