Both, sort of.
Ethernet is the most common LAN framing/encapsulation for networking protocols at layer two. Frame-Relay is very common L2 for WANs.
What you are hearing about with ISDN (or ATM) are sublayers.
The pulses making up the q921 (like "ISDN Layer 2") & q931(like ISDN Layer 3) signaling on ISDN are all still considered to occur at layer 1.
Within the Layer 1 signaling / framing (ISDN or ATM ...) the L2 protocols are carried transparently.
That's why, even though your WAN traffic is carried on Frame-Relay, probably converted to ATM in the cloud, possibly converted/encapsulated to/in SONET through some metro systems, and "un-converted" back to Frame-Relay on the other "last mile" to your other endpoint, the two WAN routers see the link as a single entity.
It's all just one long "layer 1" (logical) wire as far as the endpoint routers are concerned.
Good Luck
Scott