Denatured ethanol has little to do with ethanol. The process whereby something is converted from ethanol to denatured ethanol creates a solvent with different properties from traditional ethanol, and denatured ethanol can be dangerous.
What is ethanol?
To understand what denatured ethanol is, you must first understand what ethanol is. Ethanol is alcohol. It's the same alcohol that you find in alcoholic beverages, and is also known as ethyl alcohol. Ethanol or ethyl alcohol is consumable, but, in its denatured form, it's somewhat to highly toxic.
How does ethanol become denatured?
To create denatured ethanol, you start with regular ethanol and treat it. Denaturing ethanol renders it non-consumable and toxic. The traditional method for denaturing alcohol was to add methanol, which created methylated spirit. However, denatured ethanol has literally tons of industrial applications, so there are many different methods to denature it, depending on what you want to do with it.
Ethanol manufacturing takes into account the ultimate purpose when denaturing ethanol.
During the ethanol manufacturing process, manufacturers consider what will be done with the denatured ethanol in order to determine which method to use to denature it. You can use denatured ethanol in camp stoves, as a solvent or even as a glass cleaner. Denatured ethanol is no longer fit for human consumption, but the method whereby manufacturers denature alcohol can enhance its suitability for a specific application.
For example, some denatured ethanol is used specifically in toothpaste, and manufacturers refrain from using methanol to denature alcohol for toothpaste because methylated alcohol is toxic. Rubbing alcohol is a form of denatured ethanol, and denatured ethanol is used in many other applications. Generally speaking, you shouldn't use denatured ethanol for applications involving any sort of physical contact with the skin unless it's specifically designed for said applications, as the chemicals used to denature alcohol can causes rashes, skin irritation or more serious side effects.
Why denature alcohol?
Denatured ethanol is basically a political and business contrivance. Ethanol could theoretically be used for most jobs that call for denatured ethanol, but ethanol is also consumable. The government strongly regulates and taxes consumable alcohols, so ethanol as a consumable is quite a bit more expensive than denatured ethanol.
Denatured ethanol is a compromise with regulators that basically states the alcohol is designated for a specific purpose, and cannot be consumed by humans as an alcoholic beverage. Therefore, regulators don't tax denatured ethanol in the same manner as ethanol, the manufacturers save money and the denatured product can be used in diverse applications.
Methanol in denatured ethanol is highly toxic.
While most of the methods for creating denatured ethanol make the alcohol un-consumable and even toxic, adding methanol to ethanol creates a highly toxic compound. If people ingest methanol, it can cause blindness and even death. Therefore, denatured ethanol that has been treated with methanol is extremely dangerous and toxic to humans, and should never be consumed as ethanol. Denatured ethanol should generally be considered non-consumable, but denaturing methods involving methanol create a product that people should avoid consuming at all costs.