If something is celebrated, it's famous. Your town's celebrated restaurant — the one everybody knows and talks about — might be a modest barbecue joint.
A celebrated writer is an important, well-known one, like Ernest Hemingway or Maya Angelou. In your family, a celebrated figure might be the cousin who visits every summer and tells the best stories. As long as someone is talked about and revered by a group of people, they're celebrated. This adjective comes from the verb celebrate and its Latin root celebrare, "to sing praises of."