With the new emphasis on E85 from the Bush administration and domestic automakers, lots of commentary is being posted on the pros and cons of E85. I won't go over everything, but there are a few points about E85 that interest me. For a detailed article about the properties of E85, see the Wikipedia article here.
First, E85 is has less energy than straight gasoline. For a vehicle that is "flex fuel", meaning it must be able to run on any ratio of gasoline/alcohol from E10 (10% alcohol) to E85 (85% alcohol), this means that fuel economy will go down for a given drive cycle. Power output will also usually go down. This is not much of a selling point, especially if E85 is close to the same price as gasoline.
However, E85 has a much higher octane equivalence number than regular gasoline--110 vs. 87. This means that it can withstand higher compression ratios before detonation, and more aggressive spark timing calibration. A vehicle such as the Saab Bio-Power can take advantage of this by using forced induction and higher compression ratios to squeeze more efficiency out of E85. An engine designed to burn E85 exclusively would be a good performer, although more expensive than its flex fuel or gasoline only counterpart. With higher efficiency, however, comes better fuel economy.
The other aspect of E85 that I find fascinating is that the political push behind it is a bizarre coalition of usually unrelated or antagonistic interests. Originally, the main proponent of E85 was the farm lobby (the very definition of corporate welfare!) which wanted subsidies to keep corn prices up.
But now that the "addiction to middle eastern oil" rhetoric has been added, the E85 club includes some of the national security crowd, as well as some Greenies. E85 is one of the few things that the Farmers, Warriors, and Druids can agree on.