In the Irish language, aos sí means "people of the mounds". In Irish literature they are also referred to as the daoine sídhe ("deena shee"), and in Scottish Gaelic literature as the daoine sìth or daoine sìdh. They are variously believed to be the ancestors, the spirits of nature, or the goddesses and gods themselves.In many Gaelic tales, the aos sí are later, literary versions of the Tuatha Dé Danann ("people of the Goddess Danu" - the deities and deified ancestors of Irish mythology). Some sources describe them as the remaining survivors of the Tuatha Dé Danann who retreated into the Otherworld after they were defeated by the Milesians. According to the Lebor Gabála Érenn (The Book of Invasions) the Tuatha Dé Danann were defeated in battle by the Milesians - the mortal Sons of Míl Espáine who, like many other early invaders of Ireland, came from Spain.Geoffrey Keating, an Irish historian from the late 17th century, equates Spain with the Land of the Dead. Many scholars alive today agree with Keating’s opinion.
In folk belief and practice, the aos sí are often propitiated with offerings, and care is taken to avoid angering or insulting them. Often they are not named directly, but rather spoken of with euphemisms such as "The Good Neighbors," "The Gentry," "The Fair Folk," or simply "The Folk", in the hope that if humans describe them as kind, they are more likely to be so. In this vein, the most common names for them, aos sí, aes sídhe, daoine sídhe (singular duine sídhe) and daoine sìth mean, literally, "people of peace".
Aos sí are sometimes seen as fierce guardians of their abodes - whether that be a fairy hill, a fairy ring, a special tree (often a hawthorn), or perhaps a particular loch or wood. The Gaelic Otherworld is seen as being closer at the times of dusk and dawn, therefore this is seen as a time special to the aos sí, as are some of the festivals such as Samhain, Beltane and Midsummer. The aos sí are generally described as stunningly beautiful, though they can also be terrible and hideous.
As part of the surrender terms in their loss against the Milesians, the Tuatha Dé Danann agreed to retreat and dwell underground in the sídhe (modern Irish: sí; Scottish Gaelic: sìth; Old Irish síde, singular síd), the hills or earthen mounds that dot the Irish landscape. In some of the later poetry, we find that each leader of one of the tribes of the Tuatha Dé Danann was given one mound.
In a number of later, English language texts, the word sídhe was used for both the mounds and the people of the mounds. However, this is a modern phenomenon, and sidh in older texts refers specifically to "the palaces, courts, halls or residences" of "the ghostly beings which according to Gaedhelic mythology inhabited them" (O'Curry, E., Lectures on Manuscript Materials, Dublin 1861, p504, quoted by Evans-Wentz 1966, p291).
The fact that many of these sídhe have been found to be ancient burial mounds has contributed to the theory that the aos sí were the pre-Celtic occupants of Ireland. The Book of Invasions, the Annals of the Four Masters, and the oral history, all point in this direction. The Christian influence on these documents is quite small, which allows for a great deal of history to be taken from their contexts. (Wikipedia)