What does Welsh mean?

Welsh means someone, or something that has originated from Wales.
Either a person, object or the Welsh language.
The Germanic Angles and Saxons were invited to England to help fight the Jutes (Danish) who were at that time invading England. When they arrived to help and consequently invade England, their word for the locals (Celtic-speakers) was "Waelisc" meaning "foreigner" and their word for the land was "WÄ“alas", meaning "foreign".

The verb 'to welsh' means to swindle a person by not paying a debt or wager; to fail to fulfill an obligation.