The acronym FASD actually stands for Fetal Alcohol Spectrum Disorder. This term covers a broad spectrum of negative health effects that can afflict people due to prenatal exposure to alcohol (specifically, ethanol). Ethanol is a known teratogen, meaning a chemical substance that causes developmental damage to fetuses and birth defects. The problem is that there is no set level of ethanol exposure that a consensus agrees is dangerous for pregnant women to expose their unborn children to. The main disease that falls under the FASD term is FAS, or fetal alcohol syndrome, because it is the only alcohol related fetal disease that has a protocol for diagnosis and a code for the medical diagnosis and billing system. It is difficult to diagnose due to the fact that it can only be diagnosed years after occurring and often requires input from a group of doctors and mental health professionals to make a diagnosis.
Multiple facets are taken into account for a FAS diagnosis. The first are growth deficiencies. Abnormally low height and weight can be caused by FAS, but the birth weight and length are the best indicators for this. Second are certain facial features, in particular the lack of a philtrum (the groove between the upper lip and nose) and a thin upper lip. Third are CNS (central nervous system) disorders. This can include physical defects with the brain and cranium, neurological issues, and functional impairments like learning disabilities. Finally, investigative work like interviewing the mother and people associated with the mother during pregnancy to try to establish a pattern of alcohol use during pregnancy.
My person feeling on the matter is that ethanol can be dangerous to developing fetuses and produce permanent health and mental issues. The big problem is that no clear "danger zone" is obvious for the issue and different people will be affected by this in different ways, many not affected at all by some alcohol exposure. As a result, I feel that this is one of those things where it is better for pregnant women to err on the side of caution. In fact, the best and simplest thing that most pregnant women can do to protect the health of their unborn child is to abstain from alcohol and smoking (and illegal drugs of course) during pregnancy.