Why is methanol toxic?
Methanol isn't particularly toxic in and of itself, although it's no walk in the park.

If methanol flowed through the body without being broken down, it would cause roughly the same kind of harm as ethanol, i.e. intoxication.

The real culprit is one of its metabolic products, methanoic acid, also known as formic acid.

To understand how formic acid, present as the formate ion, is toxic, we look to Wikipedia:


  Formate is toxic because it inhibits mitochondrial cytochrome c oxidase, causing the symptoms of hypoxia at the cellular level, and also causing metabolic acidosis, among a variety of other metabolic disturbances.


Edit: As DavePhD points out, an intermediate product in this process is formaldehyde, or methanal. While formaldehyde is also toxic, it is rapidly metabolized to methanoic acid.

Reedit: The deeper, more historical reason that this happens is that methanol isn't readily available in nature, meaning that few species have developed biochemical tools to deal with it. There simply hasn't existed an evolutionary pressure to deal with methanol.