The alcohol breaks water's surface tension, allowing it to penetrate better. It increases water's wetting power, and is called a "wetting agent".
Remember that old kitchen science experiment, when you see the water in a tablespoon arch up in a dome? Alcohol or other fluids can't do that. That's because the hydrogens in water - H2O - form inter molecular bonds with the the oxygen atoms in adjacent water molecules.
http://users.rcn.com/jkimball.ma.ultranet/BiologyPages/H/HydrogenBonds.html
So water alone tends to just bead up on surfaces, especially wool which is rather water repellent anyway. Alcohol is similar enough to the structure of water to mix with it, but dissimilar enough to break up the hydrogen bonds, allowing the water to pool out and wet better.
Detergents do the same thing, but alcohols evaporate away, and detergents do not.
Clear as mud?
Rebecca