I think Ceili in irish comes from the same root as 'le Cheile" which means together, so a ceili is a gathering or get together. In parts of the north of ireland ceili-ing used to be used to describe people gathering in certain houses in the area for entertainment which usually involved music, but only if there were some 'musicianers' in the locality. This practice was common all over the country but was known by different names in other areas.

The Irish language revival movement adopted the word ceili to describe a certain style of Irish dancing and get togethers to practice the same, which I think is why the word is usually associated with dancing nowadays.