Etherite can be extracted by Wizards from Ferrite, Logs, or Black Ferrite. Etherite is used in every other Enchanting recipe. The amount produced improves with levels in Enchanting and the material used. Etherite can be sold to the Magic Shop for 8 gold pieces each.
The existence and uses of Etherite were taught to the wizards of Oberin by Avesne, at the Blue Moon Festival of 431. He claimed at the time that magic stones have an much bigger concentration of Etherite but, to this day, no other wizard was able to use them for that purpose.