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There’s no official explanation about ethers in the lore of FF7, or any other FF afaik. What follows is fan speculation:
There are two stats that represent your current state of health: hit points and magic points (“mana” points?) and in the OG, the limit gauge behaves as a third stat representing your level of pissed-offedness. Your hit point stat has a perceivable effect as it depletes, slumping you over when it gets low and at 0 you are unconscious. HP can thus be seen as representing physical exhaustion or pain threshold. When your MP stat depletes, however, it has no visible effect on you, so it can’t be a measure of physical exhaustion. Mental exhaustion? Maybe. It would stand to reason that you use your mind to perform materia abilities (“magic”) and that your ability to exert yourself in this way is limited to your mental stamina (the cool kids use the word “spoons”). This of course is replenished by a long rest, but also by ethers. If a potion is a drink that restores your physical vigor, an ether is therefore a drink that restores your focus and clarity. It is a nootropic.
It’s quite the opposite of
diethyl ether, then, which has a similar effect to alcohol and was used as an anesthetic before less-flammable drugs were developed. “Ethers” in Final Fantasy are cognitive enhancers — real world examples of this are Modafonil, Ritalin, Caffiene, and mundane supplements like fish oil and vitamin B. That seems to be corroborated by the name of the enhanced item “Turbo Ether.”
tl;dr - it’s either blue coffee, fish oil, or crystal meth