In this paper, we study the ideal structure of reduced C * -algebras C * r (G) associated to étale groupoids G. In particular, we characterize when there is a one-to-one correspondence between the closed, two-sided ideals in C * r (G) and the open invariant subsets of the unit space G (0) of G. As a consequence, we show that if G is an inner exact, essentially principal, ample groupoid, then C * r (G) is (strongly) purely infinite if and only if every non-zero projection in C0(G (0) ) is properly infinite in C * r (G). We also establish a sufficient condition on the ample groupoid G that ensures pure infiniteness of C * r (G) in terms of paradoxicality of compact open subsets of the unit space G (0) .Finally, we introduce the type semigroup for ample groupoids and also obtain a dichotomy result: Let G be an ample groupoid with compact unit space which is minimal and topologically principal. If the type semigroup is almost unperforated, then C * r (G) is a simple C * -algebra which is either stably finite or strongly purely infinite.