This question seems to be a companion to How can something non-physical exist? Some preliminary thoughts: acknowledging the existence of empirical, or even confining physical to empirical, does not presuppose empiricism. Even Parmenides and Plato acknowledged the "sensible", as they called it, even if only as "illusion" or "imitation". Later rationalists, Descartes, Kant, Hegel, etc., were even more generous. Moreover, most philosophers, rationalist or not, were keenly aware that to remain credible they ought to validate the ontology and terminology of common sense, and later science, at some level. Kant, for instance, reinterpreted "matter" as the medium of our sensibility, and Newtonian physics as based on categories and synthetic a priori intuitions, but he was careful to make sure that when it came to ordinary use physics remained physics.
The word φύσις meant "nature" in Greek (with the more archaic connotation of "growth"), so the original meaning of "physical" is natural, belonging to nature. Of course, philosophers, in this case especially Aristotle, produced many elaborations of the concept and the current ubiquity of "physical" has its roots in the title of Aristotle's well-known book, Physics. Aristotle relates the characterization to his four causes, and stresses the difference between the natural and the artificial relative to efficient causes, only the natural has its source of motion within itself. Here is Wang's summary:
"We know Aristotle divides sciences (episteme) into three parts: physical
science (theoretike), productive science (poietike), and practical science (praktike). (Metaphysics, 1025b 19–25) They concern themselves with different
classes of things: physis, techne, and ethos. Physis is of those things that are
generated by nature. That from which they are generated is matter. That which
they become is form. So physis is characterized such that the form is generated
from the matter itself (1032a 16–18). Techne is those things that are generated
artificially. In contrast to physis, the form of techne is not generated from matter itself, but from the soul of a human being."
The second major event in the genesis of the modern "physical" occurred in 13th century, and had to do with the reformation of the Aristotelian concept of matter. From signifying relative "potentiality" of any sort whatsoever it came to mean something much more specific, and familiar. Here is Pasnau's Form and Matter:
"For an Aristotelian, the fundamental constituents of physical bodies are not integral parts, but the metaphysical parts of form and matter. On one understanding of matter, it is the counterpart of form – the stuff that gets informed – so that whenever there is a form there must also be some matter
that serves as its subject... Wood, for example, is a form–matter composite
that can itself serve as the matter of a bed.
[...] Many early scholastic authors, especially Franciscans, embraced this sort of view. From the time of Albert the Great and Thomas Aquinas, however, the
view fell entirely out of favor, replaced by the idea that matter occurs only in
the corporeal realm. Hence there arose the linkage we take for granted today,
between corporeality and materiality, so that to be a body (corpus) is just to have matter."
Moreover, Aquinas explicitly links corporeality to spatial location and motion:
"To receive, to be subjected, and other such things do not apply to the soul and to prime matter in the same way (rationem), because prime matter receives a thing through transformation and motion. And because all transformation and motion goes back to local motion as to what is first and most common (as is proved in Physics VIII), we get the result that matter is found only in those cases where there is the potentiality for location. But only corporeal things, which are circumscribed to some place, are of this sort."
The more familiar characterizations of the physical/natural in Descartes and Spinoza are in terms of extension (res extensa, "the essence of matter is extension", extension as one of two attributes of God/Nature) stem from these scholastic sources.
Of course, since Galileo and Descartes the more modern scientific view of "nature" and "physical" also took hold. The "natural" or "physical" is that which is in accordance with the laws of nature (naturalism), specifically with the causal laws (Aristotle's four causes being reduced to efficient causes only), which ideally are reducible to laws of physics (physicalism), and originally to "particles in motion" (mechanism). This is the notion that features in modern philosophical debates as well, e.g. on the reconciliation of spontaneous subject with the causal world started by McDowell's Mind and World. It is only ostensibly circular, one does not need the notion of physical to establish empirical regularities, so is free to define "physical" in terms of them. In contrast, the "unphysical" is that which does not accord with those laws, and, more recently, something ghostly, unobservabvle in principle, like the luminiferous ether.
Hence, the modern medley of folk intuitions about the "physical": external to the mind/sensible/the outside world (nature), material as corporeal/tangible and spatially extended, and behaving according to (perhaps yet undiscovered) causal laws. For an 8 year old I'd say "physical is what surrounds you, what you can feel, touch and see move and change, scientists study it so they can predict how it moves and changes".
