This is an old - not maintained - article of the AEIOU.
In the Austria-Forum you find an updated version of this article in the new AEIOU.
Welsche (Middle High German "walch" = stranger, foreigner esp. used for Roman or Neo-Latin people), also called Walchen (Middle High German walhisch, welhisch = Roman, later derogatory for "foreign, strange"), originally the term used by Germanic people for the Celts, later extended to the Roman people; it was in particular the indigenous population of the Alpine area that called the Roman people "Walchen". While the majority of Roman settlers had fled the country during the migration of the Germanic peoples, some of them remained in individual places, which is sometimes evident in place names (e.g. Straßwalchen, Seewalchen, Walchsee, Walgau, Wallersee, Wals); Roman peasants still lived in the Upper Austrian Traungau region and on River Salzach in the 8th and 9th centuries. The later term "welsch", also "walsch" in vernacular, was used especially for Italians (e.g. Welschtirol), whereas Ladin people were referred to as "Krautwalsche".