The 10% ethanol additive boosts octane by 3 points and in most cases is a cheaper alternative to some of the other chemicals used to boost octane. It isn't watering down fuels and many terminals use it -- whether they admit it or not is another story altogether. Ethanol isn't a bad thing either.
http://www.ne-ethanol.org/ethfaq.html
http://www.ftc.gov/bcp/conline/pubs/autos/octane.htm