I'd say that first it would be worth discussing the difference between iSCSI and Fibre Channel over Ethernet. As you probably know, iSCSI carries block storage traffic over a TCP/IP network that's fairly high in the OSI stack for networking. As we talked about earlier, it's fairly extensive in latency and bandwidth just because you have to route all of the iSCSI frames down through the OSI layer. iSCSI was also designed to be an alternative to Fibre Channel storage for hosts. It's easy to adopt and quick to bring online.
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Fibre Channel over Ethernet, conversely, provides a direct one-to-one mapping of a Fibre Channel frame to an Ethernet frame. It operates much lower in the stack, probably will provide better service in terms of performance and as a result is a fairly simple and fast protocol. It doesn't require TCP/IP to make it work. One of the important aspects of Fibre Channel over Ethernet is that it brings things like 10 [Gigabit] Ethernet to Fibre Channel without much fuss. The design intention, however, was to be a SAN extension product -- probably to compete more with FCIP or iFCP more so than to compete with connectivity for servers. The industry really expected Fibre Channel over Ethernet to be a good way to connect to SANs in remote locations, not necessarily to connect servers to the SAN.
But there is some overlap. People have begun to discover that they can take the advantages of the simpler Fibre Channel over Ethernet protocol and extend it into the distant host via IP. If you have an existing Fibre Channel SAN and you're looking for that IP connectivity to a remote connectivity for remote hosts, if you go iSCSI you're going to have to deploy a completely separate infrastructure for iSCSI. Whereas for Fibre Channel over Ethernet, it would be possible to take a few remote hosts and drop them straight into the Fibre Channel SAN without having to have a separate infrastructure for iSCSI.
Another major reason to look at Fibre Channel over Ethernet is because it's another easy way to get 10 Gig Fibre Channel to the hosts.
Listen to the iSCSI vs Fibre Channel podcast here.