I cannot speak for the druids of all Celtic peoples, but I have knowledge on the druids of Ireland!

So, to get started, a draoi (pl. draoithe, or druí in old Irish) was a sort of very highly skilled professional in pre-Christian and early-Christian Ireland -- their role later being supplanted by other professionals, such as the poet. A draoi would be a religious figure operating alongside kings and lords, yes, but the draoi also had what Laurence Ginnell calls a 'monopoly' on various other professions of learning. They were poets, physicians, astronomers, diviners, stewards, judges, etc.

Although their rituals were conducted in the open air (typically on hills, where a lot of important ceremonies took place), living in the woods would have been seen as very strange for a draoi! They had a very clear place in court-life, with the Life of St. Patrick calling the palace of the High King the "chief seat" of druidism in Ireland. Furthermore, P.W. Joyce's A Smaller Social History of Ancient Ireland remarks that the draoi made up the mandatory retinue of the High King, and was only later replaced by a bishop.

This is not to say that the idea of a woods-aligned druid is unfounded, however. Both in Gaul and in Ireland, trees were of special reverence to the druid class -- in Gaul, the oak was venerated and in Ireland, magical meaning was seen in the yew, hazel and rowan trees above others (this is still seen in the culture) and these woods were used in ritual, with particular reference to 'druid rods' which in myth could transmogrify human beings into animals.

So, overall, in Ireland:

- Druids were held an important place in the noble court;

- Druids did revere trees to some extent;

- The magical wood-dwelling druid appears in myth and legend.

Our accounts of druids primarily come from the writings of Classical authors such as Caesar who stated that the Celts were the social elite and had control over all Iron Age sacrifices. They were called upon to act as judges in criminal cases and in disputes about boundaries and inheritances. The word druid is thought to mean 'knowledge of the oak' or a less likely translation is 'deep knowledge'.

There were specially designated sacred locations called nemeton in the Gallo-Brythonic language, which means a sacred grove or a sacred clearing. I'm going to include this entire quote from a Classical Roman author called Pharsalia as I think you'll enjoy it.

"A grove there was untouched by men's hands from ancient times, whose interlacing boughs enclosed a space of darkness and cold shade, and banished the sunlight from above... gods were worshipped there with savage rites, the altars were heaped with hideous offerings and every tree was sprinkled with human gore. On those boughs... birds feared to perch; in those coverts wild beasts would not lie down; no wind ever bore down upon that wood, nor thunderbolt hurled from black clouds; the trees, even when they spread their leaves to no breeze, rustled of themselves. Water, also, fell there in abundance from dark springs. The images of the gods grim and rude were uncouth blocks formed of felled tree-trunks. Their mere antiquity and the ghastly hue of the rotten timber struck terror... Legend also told that often the subterranean hollows quaked and bellowed, that yew trees fell down and rose again, that the glare of conflagrations came from trees that were not on fire, and that serpents twined and glided round their stems. The people never resorted thither to worship at close quarters but left the place to the gods. For, when the sun is in mid-heaven or dark night fills the sky, the priest himself dreads their approach and fears to surprise the lord of the grove."

The druid class would have resided in settlements and ventured out with their unwilling sacrifice to these sacred places to kill them. They didn't live there as it was a place of the gods, not of man.

However, saying all that, I would take the above accounts of druids with a pinch of salt. It is likely that there was a priestly class but they wouldn't have been the mystical wise old men that we are led to believe by the media. When considering the context of a lot of writing about the Celts and the druids, Caesar and other Romans were trying to scare the Roman people in order to gain funds to carry out further campaigns. Also a lot of our interpretations of druids in the media are a side effect of Victorian fantasies of Stonehenge and magic users seeping down over the years.

Sources: Archaeologist

The Ancient Celts by Barry Cunliffe