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By definition it should refer to those who are from or trace their ancestry to India, but is also commonly used in the U.S. and Canada to refer to indigenous/native peoples of North America.

The term is commonly thought to have begun with the misconception by [Christopher Columbus] that the Caribbean islands were the islands of the Indian Ocean (known to Europeans as the Indies) which he had hoped to reach by sailing west across the Atlantic. Even though Columbus’ mistake was soon recognized, the name stuck and for centuries the native people of the Americans were collectively called Indians.

American Indian is the most common and [politically correct] modern term for indigenous American peoples, [particularly] in legal/official language. “Indian” or “Indian American” can connote people from or who trace their heritage to India, however "Indian" is still widely used to refer to natives, particularly in contexts where it is unlikely to be confused with people from India. In general, native people prefer the term American Indian to Native American, though the latter is in common use and the terms are basically interchangeable. “Indian” is a rather collective term that disregards the cultural/[geographical] diversity of the peoples it refers to, thus the best descriptor is to refer to specific tribes by their tribe name (e.g. “he is Cherokee”).

In Canada, where East Indians outnumber those of aboriginal ancestry, the term First Nation is commonly used.

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