The presence of alcohol in the blood affects how the inner ear system works. There are three small fluid-filled structures in the inner ear called canals, and inner ear fluid called endolymph.

There is also a gelatinous structure called the cupula, which is filled with hair-like cells called stereocilia. 

When you are sober, moving around moves the endolymph, which distorts the shape of the cupula and moves the stereocilia, which in turn sends electrical signals to the brain regarding movement, balance, and more.

When a person drinks, this system changes. Alcohol thins the blood, which creates a difference in the density between the fluid in the canals and the cupula. The shape of the cupula is then distorted in ways that are completely unassociated with how you are moving.

The stereocilia tells the brain that the body is moving much more than it actually is, so the person may feel like the room is spinning or the ground is moving.

In essence, alcohol causes your inner ear to make adjustments to your sense of balance that don’t need to be made, causing dizziness and loss of balance.

Here’s where it gets even more interesting - this sensation can begin at a fairly low blood alcohol concentration of about 0.08 - which contributes to this being the legal cutoff for when someone is no longer safe to drive.