Thank you, that is a very good question.
Now firstly, faeries is a very general term. If you take a look at Faeries by Brian Froud or An Encyclopedia of Fairies by Katharine Brigg you will see there are hundreds of kinds of fairies.
But for simplicity’s sake lets divide them up into major types. I am using a mix of terminologies here that I believe explain things in the most simple manner.
Shining ones/Aos Sidhe: These are a divine race and/or semi-divine race of people that once ruled the British Isles, but later went underground and in the hills in a pact with the ancestors of the current residents to share the land. These fairies are usually huge and have bodies of light. Lugh, Angus, and Brigid are good examples. These are not particularly dangerous if you keep the pact with them.
Seelie fairies/Trooping fairies: These are the figures of lore seen dancing, holding feasts, and marching at the quarters as the seasons change. These creatures seem to have laws and rules in their courts. They have queens and kings and such. They sometimes kidnap beautiful and/or especially talented young people. These creatures are usually made of a kind of oily airy substance and they feed off of the spirit of foods and crops causing them to be no good for people to eat. They are usually similar to humans in build, but a little bit smaller or thinner—though most can shape change to be smaller or bigger, prettier or uglier as the case may be. They are somewhat dangerous, but sometimes can be tricked due to a moral and honor system of their own.
Unseelie fairies/The Host: These are restless undead. Perhaps fallen angels that didn’t take sides in the battle between heaven and hell. Suicides or other people who aren’t bad enough to go to hell and not good enough to get to heaven who haunt the land for whatever reason and are usually fairly solitary and are not particularly good-natured. These creatures tend to also be made of the thin oily airy substances and are also usually similar in size to regular creatures, but usually are grayer, more gaunt, and strange. They live in odd wild places like bogs and graveyards. They are very dangerous.
Primordials: This term is one that isn’t particularly celtic, but I find it describes a group of Titan like figures that are absolutely giant, the shaped the landscape itself. The Callieach is such a figure. As is Mananaan MacLear. Puck is also like this, he predates the elves and fairies and is the land of the British Isles itself. Also included in this classification (for simplicity’s sake) are the Fomorians, a race of monstrous creatures that live in the sea. They are known for being inhospitable and are often combative. These are no more dangerous than the tooth and claw of nature itself. They foretell deaths, they are the fates of nature, but don’t play a particular role in the lives of mortals unless there is a special relationship made.
Of these various types the Seelie and Unseelie fairies are the ones that are most likely to be susceptible to iron. As they are often very airy and oily the heavy dark metal of iron is too much for them to lift or cross. I have read dozens of reasons by thinkers about why fairies can’t abide iron, and I have yet to see any such reason match the fairy tales and folklore itself. Often mythologists and historians see legends as being proto-science as having to explain something—therefore to them fairies aren’t real but they explain some sort of natural physics or biology or historical migration. I figure, certain kinds of fairies actually just can’t abide iron. I can’t handle radium, plutonium, nor nickel, and copper makes my skin turn green. So I think, they just can’t—no special reason, its just how they are it likely reacts with what their bodies are made of poorly. Whereas some of the creatures called fairies are known to be fine with iron, like the primordials and shining ones.