The fetish in religion is an object that is confused with the spiritual forces it merely represents. Thus a crucifix or carved bone or chant, the thing itself, is thought to hold healing powers or other immaterial forces. The iconoclasm of Islam and early Protestantism was an effort to dispel such common human tendencies.
For Marx, the counterpart of "spiritual forces" is the complex of social and material relations by which a society produces and reproduces itself. The commodity is an object produced by labor for exchange and thus with an exchange "value" in addition to its "use value." Yet for us consumers this object appears simply to have a "value" in itself. This may be real enough, not an illusion. But it tends to conceal and misplace the vast global complex of labor, law, and other social relations that produced that iPhone and through which its "value" originates.
Marx does not define or discuss commodity "fetishism" at any great length. Yet it is a highly fruitful concept. The critical thing is to grasp the centrality of the commodity for Marx, with which he brilliantly opens Das Capital, as if it were the vital clue in a detective story.
That nearly everything produced is produced for exchange is the defining feature of capitalism. The commodity is the essential unit and very being of capitalist society. Everything is both what it materially is (its use value) and something else (its exchange value). This includes, of course, the commodity of labor, which is also "produced" for exchange.
So, can the labor commodity also be fetishized? Indeed, it often is. When the Board pays the CEO a thousand times as much as the average worker for his/her "wealth-generating" powers, that slice of labor commodity is being fearfully and superstitiously fetishized in the hopes of appeasing the gods of risk.
One very broad consequence of this is that, for Marxists, you are not going to fix social problems simply by conjuring with exchange values--for example, raising wages. This may alter prevailing beliefs and prices, but it does not indicate a real change in the social relations and underlying use values constituting social reproduction.