For an exploration of this I'd recommend Eamon De Valera: The Man Who Was Ireland by Tim Pat Coogan. This is a biography (obviously) of De Valera, but De Valera was the Irish head of state at the time and this question is dealt with in the book.

Basically, Ireland was quite a bit more involved in World War Two then generally imagined. While Ireland was a neutral in the war, and criticized for that as well, it took steps that aided the British. Large numbers of Irish joined the British forces during the war. The Irish coast guard called out locations of U-boats it spotted in the clear which was basically publicizing their location to the Royal Navy. For the most part British airmen who went down over Ireland were simply driven to the border with Northern Ireland and dropped off (this isn't universally true, however) while German airmen were kept for the duration of the war. The Irish military was so strained for me during "The Emergency" that it ended up having to rely on a home guard mostly made up of the young and the old. At one point during the war the Irish military conducted a study to see what it could do if Ireland entered the war as an Allied belligerent and basically came up with the "not much" answer as so much of the Irish manpower as already committed.

The war was a severe economic strain on Ireland, fwiw, as the impact of the Battle of the Atlantic impacted Ireland pretty heavily (this is also dealt with in the book).

As for why Ireland didn't enter the war, I'd also refer to the text, but basically the De Valera government opposed it for nationalist reasons.

Having written about Irish neutrality before, you may find this answer to be of interest.