I've never taken the term "pages from Ireland" too literally (as in hosted there, or .ie), I would think of it more as "put more Irish focus on my search". If this is the reality maybe they should rename it. Of course we're used to seeing .ie's populate the results for these searches and so it should be the case, but if it was too literal and rigid and didn't leave the door ajar for other possibilities I think it would be a bad thing for Google search.
Generally when I do an Irish related search I don't want it to just list .ie's or Irish hosted sites, I want it to give me all Irish related websites (most people who never heard of seo or know the difference between .com/.ie probably want and expect the same), .ie's will usually rank highest anyway, again as they should, but if there's a us hosted .com it must be a relevant site to get there (if Google's doing it's job properly) and is probably even run by someone in Ireland.
For a really strict search the advanced search options are there and I think you can put .ie in the domain to limit it to just .ie domains. Not really much point though because it's mostly all .ie's that come up for pfi anyway.
As for what determines eligibility and ranking in local searches, the obvious things like links, domain, hosting and content I reckon all play a part, with a ton of other less obvious stuff too, most likely.