I don't know the answer to the first bit, but "where in the ether does the money go" is nowhere. The money doesn't need to "go" anywhere, because it only exists in the form of electronic impulses in the bank's computer which tells the bank how much you have in the account. The bank merely adjusts the electronic information when it feel like it - it could even actually give you a million pounds by mistake without "taking" the million "out of" anywhere else.
The "where does it go" question only applies to physical matter and energy, which are subject to the laws on conservation thereof. So if you have deposited your money in the form of paper notes in a safe in the bank, you will only need to worry about where *that* has gone (if it disappears).