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Ethernet, unlike, say, Infiniband, doesn't promise things will get where you sent them just because it didn't error initially, so other protocols handle this at higher levels to notice the failure cases.*

For an example of what this means, try setting your MTU above the limit, and watch the raw traffic.

* - it's been years since I cared about the formal definition, my apologies if I got it wrong.

You are correct in general. Lossy = no guarantee mechanism / state-based acceptance; it’s handled by a higher level proto (tcp).

All networks are “lossy” because any cable can be cut, etc.

A “lossy” protocol is one that doesn’t attempt to compensate for that. In most cases, but not all, that means a higher level protocol will need to ensure that every bit of data has made it through. (An example protocol that might not care is one for watching broadcast TV on the Internet… if you miss a few seconds it’s not a big deal).

It means packets may be dropped, usually due to congestion.

I think it means error correction would be handled by a higher level.