Though my understanding is that ethanol as a fuel additive is largely an anti-knock lead substitute. Alcohol was the originally-proposed solution, before the creation and adoption of tetraethyl lead. Apparent cost advantages drove the adoption of the latter. True costs proved somewhat greater.
My read is that the "biofuel" branding of fuel ethanol is actually a misdirection, though I don't have a good source on that.
I think it can be used for that, but it is also used to cut gasoline and therefore make a single barrel of oil go further. Normally ethanol is less than 10 percent, but I think it can be as high as 15 or 20 percent at the pump right now. Modern engines can handle it just fine, but it does slightly reduce fuel economy.
It's also an oxygenation agent, and replaces MTBE (methyl tert-butyl ether) which ... oh, also substituted for tetraethyl lead. (I thought MTBE was an anti-smog treatment.)
MTBE turned out to leach into groundwater quite readily and there was a pretty widespread outcry about it in the early aughts. Again, ethanol is a replacement (mentioned in the Wikipedia article above).
And yes, since anti-knock agents effectively slow combustion (and ethanol has lower energy-density than petroleum), net fuel efficiency is slightly reduced on a volumetric basis. Net effect remains better overall engine performance.
Depending on what state you're in in the Midwest you can sometimes get E85 gas (85% ethanol). It's always clearly marked because not all modern engines can handle that high of a concentration.
