To gain a better understanding of how ethanol affects biological membranes, we have performed a series of atomic-scale molecular dynamics simulations of phospholipid membranes in aqueous solution with ethanol, whose concentration was varied from 2.5 to 30 mol % (lipid-free basis). At concentrations below the threshold value of similar to 12 mol % (30.5 v/v %) ethanol induces expansion of the membrane, accompanied by a drop in the membrane thickness as well as disordering and enhanced interdigitation of lipid acyl chains. These changes become more pronounced with increase in ethanol concentration, but the bilayer structure of the membrane is maintained. Above the threshold concentration the appearance of multiple transient defects in the lipid water interface eventually gives rise to desorption and assembly of some of the lipids into non-bilayer structures within the membrane interior. These structures, being small and irregular, resemble inverted micelles and have a long-lived character. Furthermore, formation of the non-bilayer structures is accompanied by mixing of lipids that belong to the opposite membrane leaflets, thereby leading to irreversible changes in the membrane structure. Remarkably, this observation of the formation of non-bilayer structures within the membrane interior, being in good agreement with experimental data, is found to be robust with respect to both the simulation conditions (the system size and the presence of salt) and the type of lipids (phosphatidylcholine and phosphatidylethanolamine). We discuss the significance of these non-bilayer structures in relation with the well-known ability of ethanol to promote membrane hemifusion as well as with the possible role of the micelle-like structures as a delivery system for polar solutes and ions. The ethanol-induced "damage" to the bilayer structure also suggests that strong alcoholic beverages (similar to 40 v/v %) might be potentially hazardous to the epithelial tissues of the human body (such as lips, mouth, throat, gullet, and stomach) that come in direct contact with high-concentrations of ethanol.