Publicity around the use of ethanol in our gasoline industry has been primarily focused on local dependence. However, there are many negative effects of ethanol on most engines, small and otherwise.
The Federal Chamber of Automotive Industries says that ethanol attacks fuel system components, including metallic and rubber based fuels lines. Ethanol also has a natural affinity to water molecules. This can result in rusting of metallic parts, which can block fuel passages, and is much more susceptible to phase separation(leaving the gasoline floating on top of a layer of water). If handled properly until it reaches the consumer and is used quickly by the consumer, phase separation is a moot point. Unfortunately as a consumer, you have no idea whether the fuel you got from the gas pump was handled properly, i.e. stored in proper containers and kept at the correct temperatures to eliminate condensation.
Leading manufacturers of small engines -- lawnmowers, chainsaws, weedeaters, etc -- approve fuel that contains a maximum of 10% ethanol. However most recommend using non-ethanol fuel. Additionally, the majority of small engine manufacturers suggest -- if E10(up to 10% ethanol) gasoline must be used -- to use 89 octane gasoline or higher.
There is also danger in using non-ethanol fuel in your equipment over a length of time, then switching to fuel containing ethanol. The ethanol content will break lose impurities that have solidified to the walls of fuel lines, fuel filters, and fuel tanks. This is caused by higher corrosive properties in ethanol than exists in gasoline. This is likely to clog small passages in the fuel filter and/or carburetor, present in most lawn and garden equipment.
For the effect of the production of ethanol fuel on our environment, see this informative Youtube video:
If you are unsure about whether or not ethanol is approved for your equipment, I suggest checking your manual. A general list is available on these websites:
Here are a few links to manufacturer specific information: