Rather shocked to discover the earliest attributions in the Oxford English Dictionary are 1889 for folk-music and 1898 for folk-singer; and folk on its own, to mean folk song or folk music, doesn't appear in print until 1963 (The Observer, writing about somebody called, er, McColl). The concept of folk in our sense of the word first appears in print in the mid-19th century, so it was probably in use only for a few years before that, by specialist academic folk-ists.

If we assume it was coined to describe something that hitherto hadn't been recognised, or hadn't been seen as warranting its own name, we may further assume it meant, Humpty-Dumpty-fashion, whatever its coiner meant it to mean at the time; consequently we can use it to mean whatever we want it to mean today:- and nobody can argue the toss!