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Alcohol dilates peripheral blood vessels, but has been known to actually. constrict some blood vessels in the brain, lowering the oxygen content. Alcohol dilates peripheral blood vessels, but has been known to actually  constrict some blood vessels in the brain, lowering the oxygen content.
Alcohol dilutes your blood (i.e., makes it less dense) because alcohol is lighter than water. Alcohol-soaked blood builds up more quickly in your ears than elsewhere in the body, and that throws off this jelly-like structure in your ears called cupula. Effectively, it makes the cupula want to float.