Ethernet controllers are usually what we call external motion devices, in other words they do the pulsing internally rather than the software pulse engine that the parallel port uses. They communicate with Mach via the Ethernet and a plugin is used to allow the device to talk to Mach.
External controllers have lots of advantages but can also have disadvantages, the main disadvantage is it will depend on the controller as to whether all features of Mach are supported, for example one external controller may support torch height control for plasma and another may not or one may support lathe threading and another not. So really you need to find out if the one you are considering supports all you plan to do.
The big advantage of an external controller is the motion is controlled externally so in the case of a Step/Dir controller the pulsing is done in hardware and that means it can be much faster and is almost certainly a much cleaner pulse. For example the parallel port is limited to 100KHz pulsing in Mach and on most computers it is likely 65KHz will be what you can reliably achieve. On an external controller 4MHz is likely and it will be a very clean pulse even up to these frequencies.
Whether you need such a high pulserate depends on your system, ie steppers it is unlikely but servos with high count encoders then it is likely it will be used.
Now there are a few different means of connection that external controllers use, USB and Ethernet are the two most used and of the 2 Ethernet is definitely the more robust and is often the method of communication in industrial machines.
Hood