This is what Fintan Valleley has to say on the subject. . .

Celtic music. Fanciful term which expresses a world-view or record-shelf category rather than actual links between music genres.
1. Indicates 'Irish' or 'Scottish' musics, but is increasingly used in Britain and the US to denote 'Irish', this suggesting discomfort with 'Irishness'. In Europe it may denote Breton or Galician music in addition to Irish, Scottish and Welsh. The music of Brittany is different to Irish music, but is within the playing and listening experience of many Irish traditional musicians. Isle of Man, England and Wales are connected cultures, but Scotland has particularly strong linguistic and music links with Ireland, as has the Scots-Irish diaspora in Canada (Cape Breton, Newfoundland, etc.)
2. More superficially the term 'Celtic' has come to apply to an easy-listening, 'mood' music with dreamy, non-specific but Irish/Scots flavour, marketed as 'relaxing', 'evocative', etc. Such albums are legion, and enjoy a large sale in the US where the Narada company produces many compilation and re-licensed collections—including the playing of such as Máire Ní Chathasaigh, John Whelan and Joanie Madden—while the Mercury label's 'Secret Garden' features Davy Spillane. Traditional players sometimes use the term also, probably to appeal to the pre-formed audience. (Seán O'Driscoll's solo album is titled Celtic Music, Shanachie's 90 per cent Irish song collection is Celtic Love Songs, Green Linnet's, with similar composition, is Celtic Women in Music and Song), but few players would describe themselves as playing anything other than 'traditional' or 'Irish' music.
Fintan Vallely, ed.
The Companion to Irish Traditional Music
New York University Press, 1999
pp. 64-65