This property shall return different value if content changes. Typically you will return either file content cheksum or hash or counter which increases with every modification. Change ETag every time a file content is updated in WriteAsync(Stream, String, Int64, Int64) method, together with a modification date. Do NOT change ETag when locking/unlocking a file.
Return null to indicate that server doesn't support ETags. Note that many client applications, including Microsoft Office, require ETag for correct functioning.
More information about ETags could be found here: http://en.wikipedia.org/wiki/HTTP_ETag.
The code below is part of 'WebDAVServer.FileSystemStorage.AspNet' C# & VB samples provided with the SDK.