An Exchange Traded Fund or ETA was originally a way to buy an index or basket of funds.
Say you wanted to buy Standard and Poor's top 500 stocks. As an individual investor, you'd would need a lot of money and would pay a lot of fees to buy up all 500. Then if some stocks were added and others were removed from the index, you would have to pay to get in and out of those.
Enter the ETF ticker symbol SPY. If you buy it, you own a single stock that reflects the composite value of the Standard and Poor's top 500.
ETFs are generally cheaper than mutual funds.
Common ETFs:
DIA is the Dow Jones index, it is only the biggest/"safest" blue chips.
RUT is the Russel 2000 which is a larger number of smaller than SPY stocks.
There are now ETFs for everything. GLD for gold, SLV for silver. I'm pretty sure if you wanted to buy cows via ETFs you could do it.
ETF Negatives:
There is a lot of debate on the precious metals ETFs because there is a LOT more paper being traded than known world supply of Gold or Silver. If everyone called it in, there would be a lot of unhappy people holding paper instead of metal.
My opinion on a bitcoin ETF:
Bitcoin is bitcoin. Unless you want to say that you are starting an ETF that represents a diverse amount of exchanges and in so doing lowers spread risk, then there is really no technical reason for this ETF being founded.
However, if you think that the less technically savvy stock traders in the world might not be able to buy bitcoin because they do not know how but do know how to trade stocks, then you could act as an easier means to the value store they wish to hold.
This is likely what they are up to, and I think it'll work for a while.