Ethanol is a powerful solvent. It’s not really “corrosive” in the sense that it will cause things to corrode (that is, to deteriorate due to chemical changes like rust) but it can and will dissolve things that gasoline will not, like many forms of rubber (i.e., your fuel lines) and rust (like the stuff in the bottom of your tank).
The dissolved stuff then winds up in your carburetor or fuel injection system, blocking fuel channels and fouling jets or nozzles. This is a drag, but not terribly difficult to fix.
In most cases, ethanol use will not actually damage your engine. If you have a flex-fuel vehicle then you don’t have to worry about any of these things- the vehicle has been engineered to avoid problems of this type.
If an engine is older and worn (excessive piston ring clearance) and operated in a cold environment then it can happen that unburned ethanol and water (ethanol is highly hygroscopic, unlike gasoline) can end up in the crankcase, compromising the lubricity of the oil. This can cause excessive bearing wear.
I’ve not personally used ethanol in a vehicle (except for that in “oxygenated” fuel in Washington State which is typically ethanol not MTBF)- all this information comes from people I know locally who are biofuel users (the solvent problem also occurs with biodiesel, which is why older diesel engines need to have their fuel supply lines replaced with nitrile) and from the northwest-biofuels email list. Take it for what it’s worth.