I wrote about this a while back, and it boils down to risk profile.
If you hold the bond to maturity, then you minimize your capital risk: if you bought a $1,000 bond, once it matures, you are guaranteed the capital back (i.e., your $1,000).
However, with a bond ETF, because the ETF is made up of underlying bonds, if interest rates go up, the aggregate value of the ETF will go down. Say you have an ETF with a single bond, and assume:
Semi-annual payments of $25 (i.e. 5% on $1,000 par)
Market rate for bonds is 3% per annum
If there are 5 years remaining, the bond at 3% will be worth $1,092.22 (assuming no other fees). If interest rates instantly move to 4%, the bond suddenly drops to $1,044.91. So if you bought the bond in the morning, and sold it in the afternoon, you have suddenly lost $47.31. This scales up with multiple bonds, since they are all affected by market interest rates.
Contrast this with your bond: you are guaranteed to get back your $1,000, regardless of the movement of interest rates. However, while you have minimized loss of capital, you have now emphasized reinvestment risk. Going back to our example, if you paid $1,092.22 for the bond, that assumes prevailing rates of 3% on your 5% coupon bond. If rates suddenly jump to 4%, but your money is locked in at 3%, you are now missing out on 1% in returns elsewhere.
So it comes down to risk profile: you trade one risk for another. In the example above, you may have lost $47.31, but now you can take the money from the sale and re-invest that in something offering a 4% return.
