An enhancement bonus is an item property for weapons that combines an attack bonus and a damage bonus into a single property. Thus, it increases the wielder's attack rolls and the (physical) damage inflicted, each by the enhancement amount. In addition, like a weapon's attack bonus, it can be used to bypass damage reduction and is subject to the +20 attack bonus cap.
For stacking purposes, an enhancement bonus can be thought of as an attack bonus plus a damage bonus of the same damage type as the weapon's base damage. That is, multiple enhancement bonuses do not stack, an enhancement bonus does not stack with an attack bonus, and an enhancement bonus does not stack with a damage bonus of the same damage type as the weapon's base damage. Furthermore, a +3 attack bonus does not block the increased damage from a +2 enhancement bonus (for example), even though it does override the attack increase from the enhancement bonus. (The bonus from enchant arrow is the notable exception to this rule; it stacks with all item properties.)