Edbray's explanation is correct, but if you want a simpler explanation here it is.
Basically in Ettl mode your flash will fire a pre flash, the camera will see this pre flash, magic will happen and then the flash will fire the actual exposure flash at a correct power level required, taking into account your camera exposure settings, the lens used, distance to the subject etc etc.
It's basically an automatic mode. A lot of people will tell you that its not great but personally I find Ettl (and in particular, wireless Ettl) fantastic, in certain (but not all) circumstances.
If you want to get into portraiture for instance, it would be very worth buying an Ettl flash, even better two, (or one and the Canon transmitter, or a long Ettl cord etc) so you can take advantage of wireless Ettl.
I took this pic using wireless Ettl:
The flash providing the exposure was outside on a stand, shooting through a glass door. I had my 580EX2 on camera acting just as a master/commander. Instead of going back and forth adjusting the flash power I could change the exposure on the camera's lcd. This allowed me to concentrate on capturing the shot - Julia moves fast and if I'd shot with manual flash I would not have got a shot at all. Alright this is just a messing about shot nothing special, but it illustrates the usefulness of Ettl/wireless Ettl quite well.