An incorporeal creature is one that has no physical body. In terms of game effects, this means 50% concealment and the ability to walk through other creatures. In addition, incorporeal creatures are intended to have the immunities granted by the woodland stride feat. Unfortunately, due to bugged scripts, only web (and its shadow variant) correctly respects incorporeality.
A creature is flagged as incorporeal by setting an integer local variable named X2_L_IS_INCORPOREAL to 1 on the creature. This must be done before the creature's OnSpawn event fires (typically by setting it on the blueprint) or else the creature will not receive the concealment and the ability to walk through other creatures. Furthermore, since these benefits are implemented as extraordinary effects, they are lost upon resting.