The "Fabric" is the interconnect between different components on the chip. It's what the different units use to communicate and transport data.

The "Neural Engine" is a special compute unit specifically for machine learning. The iPhone Camera app uses it for semantic segmentation, for example.

Fabric is a common term for describing on-chip interconnects in a system-on-a-chip.

It's all the wires and buffers and pipeline registers and arbiters and decoders and muxes that connect the components together.

It's dominated by wires, typically, which is probably how it came to be known as a fabric. (Wild speculation on my part.) I've been hearing that term for a long time. Maybe 20 years?

The Neural Engine in iPhones is used for things ranging from photography enhancement to facial recognition for the unlock and Siri.

I wondered this too. In my experience, "fabric" typically refers to the programmable logic region in a FPGA-based SoC (such as the Xilinx Zynq). I'm assuming the M1 does not have this, so I'm not sure what it means in this context.