Mac Loses Internet – Why When Connecting iPhone?

You can adjust the order of your network interfaces in the Network panel of System Preferences. This allows you to set the primary adaptor for your network location, which in your case should be the Wi-Fi adaptor, since that provides the actual correct default route to the Internet.

The re-ordering UI is accessible by clicking on the 'gear' icon below the list of Network Adaptors on the left side of the Network Panel, and choosing "Set Service Order...".

You'll probably want to make & use a new Network Location for this setup, because in general (where either Ethernet or Wi-Fi provide valid default routes to the Internet), the Ethernet will be the better preference.

The same re-ordering can be useful for slightly unusual network setups, or VPNs where you may actually want all traffic to go through the VPN route (ie it should be the first service in the list) or maybe you only want the local subnet traffic on the VPN (ie your standard ethernet/wi-fi connections should precede it).

The problem is that iOS is detecting your network as an Enterprise network that requires username and password. The work-around: Manually enter the network type into iOS. To do this with iOS 7.1: Settings / Wi-Fi / Choose a network, and select "Other". Put in the name (SSID) as it is advertised on the previous screen. Under Security, choose WPA2 or WPA (try both). Do not choose the "Enterprise" network. Enter the password. My experience is you have to try 3 or 4 times before it works; don't know why, maybe fat fingers.