Ethnicity estimates, as their name suggests, are only estimates. This is because your ethnicity is estimated in relation to the ethnicities of the ever-changing population of testers in a company's database. You may even notice that your ethnicity estimate changes each time you visit your testing company's website. If you see a small percentage (roughly less than 5%) of an unexpected ethnicity, this may be 'statistical noise' that you can disregard. If you see a higher percentage of an unexpected ethnicity, you likely have an ancestor of that ethnicity.
Ethnicity estimates also raise complicated questions about how ancestry, culture, and genetics relate to one another. Many geneticists point out that ethnicity itself is not exactly a scientific category but is instead a socially constructed category that denotes a group's shared culture and geographic origin. Although our DNA does contain indications of which ethnic groups our ancestors belonged to, this does not necessarily mean that we have inherited our ancestors' cultural identities through our DNA. Read commentary about the limits of ethnicity estimates in, NPR, the Atlantic, and Wired.
In the case of Jewish genetic genealogy, it is important to remember that while an individual's DNA can point to Jewish ancestry, Jewish identity also exists beyond a certain genetic background. For thoughtful discussions of Jewish identity and genetics, see the recommended reading in the 'Additional Resources' section of this guide.
Despite these caveats, ethnicity estimates still can be useful for genealogists. If you are estimated to have a relatively large percentage of an unexpected ethnicity, you likely have an unknown ancestor who belonged to that ethnic group. By analyzing your match list and building your family tree in as much detail as possible, you may be able to discover who that ancestor was and how they fit into your family tree. You will also need to compare with the trees of your matches and look for hints there. In some cases you might need to build research trees for your matches in order to pinpoint the individuals who are your common ancestors.
If you believe you may have Sephardic ancestry, remember that 23andMe does not identify Sephardic ethnicity. While the other testing companies do identify Sephardim as an ethnic group, genealogist David Mendoza writes that the companies identify Sephardic ancestry imperfectly, and that Sephardim may find their ancestry represented as Spanish, Portuguese, or Iberian. Mendoza suggests that researchers complement their DNA tests with traditional genealogical research to determine whether their Iberian ancestors were Jewish or non-Jewish. See our research guide for Sephardic and Mizrahi genealogy here.
Resources for understanding ethnicity estimates