Methanol poisoning can be treated with ethanol because of the ability of ethanol to act as a competitive inhibitor. The sites on the enzyme alcohol dehydrgenase that help in the breakdown of methanol into its toxic byproducts (formaldehyde and formic acid) are instead occupied by molecules of ethanol which have a higher affinity. Ethanol is not converted into toxic compounds like in the case of methanol. This gives the body time to expel the methanol without having to deal with the toxicity associated with it.
It has to be kept in mind that ethanol treatment works only when it is given to the person within a short duration after the methanol has been ingested. A delay results in the start of enzymatic action on methanol and it is not possible to get rid of the toxins except with other ways of treatment like dialysis.