ETFs are designed to track the value of underlying assets. These assets could, for example, be stocks, commodities, or bonds.
Most ETFs track an index, such as the Dow Jones Industrial Average, Russell 2000 or NASDAQ. You can buy an ETF if you think its associated index is going to rise. You can sell an ETF short if you think the index will fall.
The number of bond ETFs has grown with time, allowing investors to pick from a wide range of markets, including government bonds (short, medium, and long-term), corporate bonds, high yield corporate bonds (junk bonds), municipal bonds, mortgage bonds, inflation protected bonds, etc.
Bond ETFs are traded like stocks and hence allow individual investors to trade the bond markets (or instruments which correlate with the bond markets) using their online stock trading accounts. Bond ETFs are much more liquid and more easily traded than the underlying bonds. Pricing transparency is also much better for bond ETFs than the bonds they are composed of.
Another advantage of Bond ETFs is that you can buy or sell them short depending on your outlook. If, however, your account does not permit you to sell short, you can instead buy an Inverse Bond ETF whose price will behave in an opposite way to the underlying bonds.
iShares Bond ETFs, for example, pay monthly dividends while capital gains are distributed once a year and this is common throughout the industry.
Bonds have finite life spans, but ETFs do not. They are based on the average value of bonds in whichever market they are shadowing. The result of this is that ETFs carry greater risk than bonds. At the end of its lifetime, a bond can be redeemed at its face value and hence, as the bond nears the end of its lifetime, the risk in holding the bond is small. Since bond ETFs do not reach an end, they do not exhibit the low risk that bonds have near the end of their lifetime. Depending on the situation, this can lead to bond ETFs outperforming or underperforming the actual bonds.