arete is the quality that makes something fit for its purpose. The arete of a soldier is his bravery; the arete of a knife is its sharpness. Although commonly translated as "virtue", virtue has an inaccurate moralistic connotation--"excellence" would be a better, yet still insufficient, translation.
Arete need not be ethical; indeed it need not even be a trait of a person. It is a trait of anything, whatever that thing is, that makes it good at doing what that sort of thing characteristically does. Thus Plato can speak of the arete of a pruning knife.