How to fix /etc/ folder on Mac OS X

Reboot your Mac, holding down command-s when you first hear the boot chime. Keep holding it down until you start seeing text on the screen. The system will boot into single user mode with a root shell.

mount -uw /
chmod a+x private/etc

will make /etc accessible again. Type exit to the shell and the Mac will finish booting.

Kyle Jones' answer will definitely work, but have you tried running a Permissions Repair from Disk Utility? That might do the trick....