When Should I Use the Word 'Castillian' ('Castellano') Rather Than 'Spanish' (Español)There is no need to get confused about the words 'Castillian' ('Castellano') and 'Spanish' (Español). You can always use either one interchangeably when talking about the Spanish language in Spain.
It is a little clearer to talk about 'Castillian' ('Castellano') rathern than 'Spanish' (Español) when talking about the various languages spoken in Spain. That isn't to say you can talk about 'Catalan Spanish' or 'Basque Spanish' (we just say 'Catalan' or 'Basque'. But, at the very least, it prevents confusion about whether you're talking about the 'Spanish people' (a politically charged notion in itself when you're talking about the languages and nations of Spain). Read more on Languages Spoken in Spain.
Castillian Spanish or Castellano can also be used to refer specifically to the accent of Spaniards who live in or come from Castilla (the regions of Castilla-La Mancha, Castilla y Leon and Madrid). However, it is not wrong to say that a Catalan person speaks Catalan and 'Castellano', even if he has never visited Castilla.
It is also useful to use the term 'Castellian Spanish' to differentiate between the version of Spanish spoken in Spain and the language of Latin America (which should be referred to as 'Latin American Spanish'). One thing you can't do is refer to the language spoken in Latin America as 'Castillian Spanish'.
Read more about Varieties of Spanish from the About.com Guide to Spanish.