If you’re “away with the fairies,” you’re in a dream-world, not facing reality.
This phrase came from the Scots/Irish Gaelic traditional folk myths, including a belief in the existence of “the little people.” Irish folklore tells of the Sidhe, a supernatural, dominant clan of fairies. The stories involve the Sidhe appearing from some hidden place, either their underground lair or from an invisible world, and spiriting people away. The stories usually involved the victim returning after what seemed like a few hours only to find that many years had passed in the world of humans.
The everyday belief in a nether world populated by fairies, elves, pixies, leprechauns, and goblins was commonplace in medieval Europe, as was the belief in their interaction with the real world. A letter to the Scottish poet William Drummond, dated October 1636, contained the following: “As for the Fairy Queen, of whom you wrote to me, her Apparitions of late have bewitched so many, that I find sundry ready to dance with the fairies.”
The belief in people being taken away by the fairies was very well-established by the time that the phrase “away with the fairies” first came to be used, which wasn’t until the 1900s. This earliest example of the expression in print appears to be in the New Zealand newspaper The Otautau Standard and Wallace County Chronicle, May 1909. This retells a story from Ireland, in which a Michael Coyne attempts to convince onlookers that he hadn’t murdered his rival, James Bailey. Coyne says, “Don’t mind your son; that is not him you see there.” Bridget Bailey understood that he meant that her brother was away with the fairies.
A tip of the hat to the blog Phrases for all that information. https://www.phrases.org.uk/
I’ve read so many wonderful stories about the Sidhe, that half of me wishes they were real. The other half remembers that these fairies can be devious and sometimes cruel. So I’ll stick to Irish whiskey; after drinking that, I return to the real world within mere hours.