It depends on where in the world you are. A lot of the time we see the word gala associated with black tie charity events (formal evening wear), but gala is also used for local events as well, for example a church gala or a school gala. A Church/school gala will be very similar to a town fair. A festival on the other hand often occurs over many days and will often be focused around a theme. Bierfest, a music festival, or an arts and crafts festival.

A gala is generally considered much more formal than a festival, and a festival is commonly associated with holidays especially.